Save a numbers’ jugglery, the Petroleum Levy (PL) collection for FY21 would be a maximum of Rs420 billion, now that June 2021 petroleum consumption numbers are here. That is another Rs80 billion added to the fiscal deficit equation of the fiscal year just gone by. Recall that the finance ministry, for some reason, had decided to show Rs500 billion as PL collection for FY21. That is not happening anymore. Not even with record high consumption seen in June 2021.
That said, FY21 is all set to record highest ever tax revenue on petroleum products. Both, GST and PL collection have posted highest ever yearly numbers at Rs300 billion and Rs420 billion, respectively. The fiscal year saw PL going from one extreme to the other. From posting Rs139 billion in 2Q, the PL dipped to Rs44.6 billion in 4Q. From the highest ever quarterly PL to lowest quarterly PL in 12 quarters – separated by just one quarter. On the other hand, the GST revenue in 4QFY21 was the highest ever at Rs86 billion – resulting from record petroleum sales at high selling price.
The GST collection in 4QFY21 surpassed PL’s for the first time in eight quarters. The PL was Rs41 billion lower than GST for the quarter, which is the biggest quarterly difference ever reported. The per liter tax on petrol and HSD combined at Rs37/ltr is also highest ever – up by Rs2.5/ltr from a year ago. Petro price averaged Rs107/ltr in FY21 – which means petrol has averaged the same for two years. The average Arab light price at $57/bbl is also identical for FY21 and FY20 – but varying degree of volatility caused more concerns in FY21.
FY21 is history. The missed PL collection target will be known in the near future. But the present is a daunting one for the government, that has set up unrealistically high revenue targets for the year and started with abolishing PL on petrol. Now that the GST has also been tinkered with, it is not beyond the realm of possibility that the government could work on the PL enhancement formula by lowering the GST, without having to increase the price. This may sound like a zero-sum game, but since PL is not part of the divisible pool, desperation may well lead Islamabad to take that step.
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