ISLAMABAD: The federal government has passed on 8.65 percent benefit of cost of supply of petrol (Mogas) to general public against 32.86 percent actual reduction calculated by the Oil and Gas Regulatory Authority (Ogra) for the current month.

According to notified prices of petrol on Sunday, a substantial portion of the benefit of reduction in cost of supply over May has not been passed on to consumers but retained by the government to meet revenue requirements.

The cost of supply of petrol in June has been reduced by Rs 11.74 per litre - from Rs 35.73 per litre to Rs 23.99 per litre over previous month, a reduction of 32.86 percent. The price charged to has been reduced by Rs 7.06 per litre (8.65 percent) - from Rs 81.58 per litre to Rs 74.52 per litre for the month of June.

The government has kept the rate of general sales tax (GST) at 17 percent for the month of June, a tax that is part of the divisible pool and subject to the agreed National Finance Commission resource distribution formula between the centre and the provinces. With GST rate remaining unchanged and with a fall in price actual collections would decline from Rs 11.85 to Rs 10.83 per litre.

"Since sales tax is at 17 percent of the price, hence we will lose additional revenue of over Rs7-10 billion on new prices of the POL products during June 2020," an FBR official told Business Recorder.

Petroleum Levy has increased from Rs 23.76 per litre on petrol to Rs 30 per litre (an increase of Rs 6.24 per litre or 26.26 percent). The revenue of FBR gets a bonanza without any effort. Since PL of Rs 30 per litre is maximum statutory limit, this also indicates that the Federal Finance Act 2020 may witness amendments for further enhancement of the said statutory limit of Rs 30 per litre.

While the price has been reduced, the Oil Marketing Company's margin and the dealers' commission are constant at Rs 2.81 per litre and Rs 3.70 per litre, respectively.