POL products' prices: Cut to cost kitty Rs 70 billion by June 30

The government has decreased by up to 38 per cent the rate of petroleum levy (PL) on High Speed Diesel (HSD) and petrol which will have a financial impact of Rs 70 billion by June 30. On Tuesday, the federal government announced to reduce the prices of all petroleum products by Rs 15 per litre by adjusting the rate of PL on all petroleum products. Sales tax on Kerosene oil has been decreased from Rs 13.43 per litre in March 1, 2020 to Rs 11.25 per litre from March 25, 2020. Sales tax on other petroleum products has also been decreased on per litre basis.
Ministry of Finance has decreased the PL on HSD by Rs 9.56 to Rs 15.49 from Rs 25.05 per litre in March 1 to March 24, a decrease of 38 percent. The rate of levy on petrol has also been decreased by Rs 2.59 to Rs 17.16 from Rs 19.75 per litre, showing a decrease of almost 13 percent.
The petrol and HSD are the two major revenue earning products for the government because of their massive consumption in the country. Total HSD sales are around 650,000 tonnes per month against a monthly consumption of around 700,000 tonnes of petrol.
The levy on kerosene has increased from Rs 12.33 to Rs 18.59 per litre, showing an increase of 50 percent. However, the prescribed price of local kerosene oil has been reduced by Rs 12.8 per litre from Rs 76.56 per litre to Rs 63.74 per litre and sales tax rate has been reduced from Rs 13.43 to Rs 11.25 per litre. The PL on kerosene is now the highest since April 2009.
The petroleum levy on light diesel oil (LDO) was increased from Rs 4.94 to Rs 8.44 per litre, showing an increase of 70 percent. The sales of kerosene and LDO are generally less than 10,000 tonnes per month, according to oil marketing companies.
Brent Oil prices have fallen from $60.22 per barrel in February 2020, to $22.90 per barrel in recent days, down 63.4 percent. In comparison, the average prices of petrol and HSD has been decreased by 12.9 percent. FBR sources said that the decrease in petroleum prices would also have negative impact on sales tax collection of the Federal Board of Revenue (FBR) during 2019-20. Despite no change in standard rate of 17 percent sales tax on POL products, the sales tax calculated on per litre basis by OGRA would be decreased due to reduction in prices of POL products.
The government has been charging general sales tax on all petroleum products to a standard rate of 17 percent across the board since February 2019. Besides the 17 percent GST, the government had more than doubled the rate of petroleum levy on HSD in recent months to Rs 25.05 from Rs 8 per litre, while levy on petrol had also been increased to Rs 19.75 instead of Rs 10 per litre. The petroleum levy on kerosene and LDO has been increased to Rs 12.33 and Rs 4.94 per litre instead of Rs 6 and Rs 3, respectively.
The government collected Rs 138 billion under PL in first six months (July-December 2019) against Rs 216 billion budgeted for financial year 2019-20. The federal government announced on Tuesday to reduce the prices of all petroleum products by Rs 15 per litre for three months which will have revenue impact of Rs 70 billion. In a statement, Ministry of Finance says that in a major effort to address the crisis due to Covid-19, Prime Minister Imran Khan approved on Tuesday a reduction of Rs 15 per litre in the prices of all petroleum products for three months.
The new price of petrol is Rs 96.60 per litre after decreasing from Rs 111.60 per litre. The price of HSD has also been reduced to Rs 107.26 per litre from Rs 122.26 per litre. The price of SKO has been reduced to Rs 77.45 per litre from Rs 92.45 per litre. The price of LDO has been slashed to Rs 69.51 per litre from Rs 84.51 per litre.
A 13.5 percent decrease has been recorded on the per litre petrol price, 12.3 percent reduction on HSD prices, 5.5 percent on SKO and 17.82 percent on LDO prices. The prices of Oil Marketing Companies (OMCs) kept the prices of High Octane Blending Component (HOBC) unchanged despite Rs 15 per litre slash on all other petroleum products. The fuel generally is being used by the owners of luxury vehicles.
When contacted with a spokesman of an OMC, he said that the government not only allowed OMCs to fix HOBC price but also to directly import the commodity. He maintained that the company imports the commodity from international market at higher price, moreover it was transported from Karachi to upcountry this also increased the cost as a result it was being sold on higher rates.