ISLAMABAD: Petroleum Division announced a reduction in the price of petrol by Rs 40 per litre, a cut of 12 percent, and High Speed Diesel by Rs 15 per litre, a reduction of 4.7 percent, with a view to reversing declining demand that was compromising the capacity of the government to meet the budgeted petroleum levy target of Rs 869 billion.

This was stated by a highly placed source on condition of anonymity, who added that the interim government is anticipating sale of petroleum products would increase by at least 10 percent during the last fortnight of October and meet its targeted Petroleum Levy (PL) collection of Rs 60 billion per month. PL collection was around Rs 35-40 billion in September, he added.

Finance Division is scheduled to release the first quarter (July-September 2023) collection under PL shortly. The government is not charging GST on the POL products.

The government raised PL by Rs 5 per litre to Rs 55 per litre on HSD and retained the PL rate on petrol at its maximum limit of Rs 60 per litre with effect from October 16, 2023.

The demand for petroleum products hit a 44-month low at 1.06 million tons in September 2023.Sale of petroleum products declined to their lowest level since the Covid-19 lockdown in March 2020, down by 23 percent month-on-month (MoM) and HSD by 28 percent MoM.

The decrease was primarily attributed to record high prices, availability of smuggled oil from Iran and lower furnace oil-based power generation.

Last month, a report was submitted to Prime Minister Secretariat noting that Pakistan is facing a loss of more than Rs60 billion annually due to smuggling of more than 2.81 billion litres of oil from Iran.

While furnace oil sales fell 28 percent MoM due to the shift of power generation to re-gasified liquefied natural gas (RLNG) or coal and other alternative sources.

The three sectors that depend on petroleum products are transportation, energy and industry. Transportation uses 59 percent, electricity 32 percent and industry 8 percent of imported petroleum products in the country.

Copyright Business Recorder, 2023