ISLAMABAD: The government met its projected revenue collection from fuel by adjusting the petroleum levy (PL) on different products for Oct and did not accept Oil and Gas Regulatory Authority (OGRA) recommendation to raise the price of imported motor spirit (MS) and reduced the price of kerosene oil (SKO) and light diesel oil (LDO) in the fortnightly review for Oct (1-15).
The federal government reduced petroleum levy (PL) on MS, maintained it on high speed diesel (HSD), and increased it on SKO and LDO.
The government however accepted the regulator's recommendation to reduce the price of HSD, which is largely used in the transport sector and locally produced.
The government rejected the oil and gas regulator's recommendation to increase the price of MS by Rs 3.13 per litre and maintained the price at the Sep level.
According to Petroleum Division, OGRA recommended an increase in the price of MS by 3 percent keeping in view the average import price of crude oil for the last three months (July-Sep 2020) however the government kept the price unchanged by reducing the rate of PL while keeping the general sales tax (GST) at the standard 17 percent rate.
The government reduced PL on petrol from Rs 30 per litre to Rs 27.32 per litre for October 1 to October 15. The price of MS is Rs 103.97 per litre instead of OGRA recommended price of Rs 107.10 per litre and the ex-refinery price of petrol is Rs 51.50 per litre - the same rate as in Sep.
The government reduced the price of HSD by 2.3 percent or Rs 2.40 and kept the PL at Rs 30 per litre. The ex-refinery price, however, came down from Rs 54.41 percent to Rs 52.01 percent.
The government also maintained the price of SKO at Rs 65.29 per litre, while the regulator had recommended Rs 58.93 or a reduction of Rs 6.36 per litre or by 9.7 percent and increased the rates of PL from Rs 6 per litre to Rs 11.43 per litre. SKO fuel is mostly used by the defence sector.
The oil and gas regulator also recommended a reduction in the price of LDO by 10.1 percent or Rs 6.36 per litre. The government rejected Ogra's the recommendation and maintained the September price of Rs 62.86 per litre by raising PL from Rs 3 per litre to Rs 11.43 per litre PL.
Islamabad Policy Institute said "The prices of petroleum products are now revised on a fortnightly basis based on the previous fortnight's internationally published Platts index.
In the price announcement made, the government has fully passed on the decrease in diesel prices and for petrol a slight increase of less than Rs 0.50 has been accommodated by reducing the petroleum levy on the same.
Reduction in HSD price should lead to reduction in the cost of goods transportation as well as the public transport fares. This would translate to more benefit to the economy, provided the logical reductions in fares do take place!
As far as petrol is concerned, the change would have been inconsequential."
Petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country. Total HSD sales are touching 700,000 tonnes per month while the monthly consumption of petrol is around 600,000 tonnes.
Copyright Business Recorder, 2020
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