The budget deficit may swell by 0.2 percent if the government withdrew the oil prices rise, Business Recorder has learnt. The 0.2 percent rise for the remaining six months of the current fiscal year (January-June 2011) is based on the earlier estimates of a 4.7 percent budget deficit for 2010-11, as agreed with the International Monetary Fund (IMF).
The revised estimate of the budget deficit, as per sources in the Finance Ministry, is expected to be around 7.5 percent. If the 7.5 percent budget deficit is taken into account, then the rise in deficit due to withdrawal of the oil prices rise in line with the rise in the international price of oil would be lower.
"If government withdraws the decision of raising oil prices that has resulted in countrywide protests, the government would face a revenue loss of Rs 4.7 billion during the current month," sources said, adding that total revenue loss of over Rs 40 billion would have to be borne during the remaining six months of the current financial year.
The government is currently charging Rs 10 per litre Petroleum Levy (PL) on petrol, Rs 14 per litre on HOBC, Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil and Rs 8 per litre on high speed diesel (HSD). The government is also collecting Rs 11.58 per litre general sales tax (GST) on petrol, Rs 13.71 per litre GST on HOBC, Rs 10.90 per litre on kerosene oil and Rs 10.31 per litre GST on LDO.
The government had estimated collection of Rs 250 billion revenue on account of taxes on petroleum products in ongoing financial year. The option to adjust rising impact of international oil prices in Petroleum Levy (PL) is available to the government. Sources said that the Petroleum Ministry had proposed to the Petroleum Minister not to pass on the rising impact of over Rs 6 per litre to the consumers during ongoing month, saying that it would result in countrywide protests. But the Prime Minister did not heed Petroleum Ministry's suggestion and instead heeded the advice of the Finance Ministry to raise oil prices.
Due to Musharraf government's decision to keep oil prices unchanged, the government was compelled to pay Rs 297 billion subsidy on petroleum products, resulting in circular debt that is still to be resolved," an official said, adding that now the Finance Ministry is also injecting money into the energy sector to clear the circular debt.
The government claims that it has no fiscal space to cut oil prices. But analysts argue that the government should slash current expenditure rather than placing cut in development budget to provide relief to consumers on petroleum products. Presidency, Prime Minister Secretariat and Ministers are advising the masses to bear the brunt of oil prices but are not willing to cut expenses. "After coming into power, almost all ministers and secretaries spent huge amounts of public money on renovation of their offices, a practice indicative of profligacy, sources added.