PL on POL products target: IMF-govt talks hamstrung by disconnect

ISLAMABAD: A massive disconnect is evident between the projection by the Petroleum Division of Rs 350 billion from petroleum levy (PL) for 2022-23, premised on maximising the levy to 50 rupees per litre on all petroleum products allowed under the existing legislation, the budgeted amount of Rs 750 billion and the International Monetary Fund (IMF) insistence that total collections under this head be raised to Rs 855 billion.

Discussions are underway between the government and the Fund however the government would have to re-legislate to raise PL from Rs 50 to Rs 70 per litre to generate Rs 855 billion in the remaining months (February-June) of the current year based on current fuel consumption, exchange rate and international oil prices, an official of Petroleum Division told Business Recorder on condition of strict anonymity.

In first half of current financial year (July-December 2022) around Rs 170-180 billion was collected as PL – 24 percent of the total budgeted PL target for the year.

Sources said that the final figure of actual PL collection on POL products in the first half of financial year will be released in the current month.

IMF conditionalities: Govt raises fuel prices in a gesture of compliance

Petroleum levy on petrol is already maxed out at Rs 50 per litre since November 2022 however an official told Business Recorder that “if upper limit of PL on petrol and HSD is raised by Rs 20 each to Rs 70 per litre the government may be able to collect Rs 20 billion ever month - from February to June - or a total of Rs 100 billion till the end of the current fiscal year.”

Raising PL on the other two petroleum products – Superior kerosene oil (SKO) and Light Speed Diesel (LDO) by Rs 20 per litre would generate an estimated revenue of Rs 1.3 billion (Feb-June 2022-23), as consumption of these two items in total petroleum products is not more than 0.4 percent. Currently, Rs 6.22 per litre PL is being charged on SKO and Rs 30.45 per litre on LDO.

Sources maintained that the government is anticipating little change in consumption of petroleum products in coming months and is projecting on the basis of the trend observed during the first six months of the current financial year.

Oil Companies Advisory Council (OCAC)’s comparative data of sale of petroleum products July-December 2021-2022 showed the following: petrol imports were down by 27 percent to 2.624 million tons and HSD imports declined by 38 percent to 1.285 million tons.

Sources said that although the government is hesitant to impose GST on petroleum products, yet petroleum price hike might be drastic in the next fortnightly review due on February 15, 2023.

A senior Federal Board of Revenue (FBR) official revealed that the Board recently moved a summary to Finance Minister Ishaq Dar to impose a lower than the standard sales rate of 17 percent on petroleum products which was rejected. The revenue impact of 17 percent sales tax on petroleum products has been estimated at Rs 90-100 billion in the last five months of the current year.

Copyright Business Recorder, 2023