Petroleum revenues reach all-time highs

Pakistan’s fiscal operation numbers for 1HFY24 are yet to be announced, but it is almost certain that highest-ever quarterly Petroleum Levy (PL) collection is on the cards. The PL collection is estimated to reach Rs250 billion for the first time ever, for the October-December quarter of FY24 – beating the record of Rs222 billion set in 1QFY24.

It helps that the authorities acted swiftly on setting PL targets well in advance of the deadlines set by the IMF, aided also by a sharp correction in oil prices and much more stable currency. All this while, combined petrol and HSD sales for 1HFY24 have gone down 6.6 percent year-on-year. The PL on HSD has gone up from an average of Rs12/ltr in 1HFY23 to Rs53.75/ltr. That for petrol is up from Rs34.5/ltr in 1HFY23 to Rs58.3/ltr in 1HFY24. The levy on both petroleum products has reached the ceiling, surpassing the average PL requirements laid down by the IMF in its ongoing SBA.

Recall that there is still no GST on petroleum consumption since 1QFY23, yet the PL only revenue on HSD and petrol for both quarters of FY24 has surpassed any previous quarterly revenue collection (GST including).Pakistan is well on course to meet the rather lofty annual PL collection target of Rs869 billion for FY24, having comfortably reached 54 percent of the annual target by 1HFY24, even with suppressed demand. With the PL limits on both HSD and petrol now maxed, even a 16 percent year-on-year dip in petroleum consumption for 2HFY24 will be enough to meet the annual PL target. If the consumption pattern for 2HFY24 stays the same as 1HFY24 – PL collection is still expected to exceed the target by Rs40-60 billion.

Even with petroleum revenues at an all-time high, Pakistan is still losing on billions in taxes due to rampant smuggling. There is no explanation to the drop in HSD consumption, which on 12-month moving average basis was at its lowest in December 2023. Even accounting for the price hike and general slowdown in economic activities, nothing could explain HSD consumption at the lowest since at least 2010. The size of the economy has grown manifolds in the last 13 years, and there is no way the consumption has actually gone down instead of going up all this while. The loss to exchequer due to smuggling runs in excess of hundreds of billion, which is criminal on the part of all those involved in the process. Imagine the benefit to consumers and the exchequer both if smuggling was to stop.