Govt increases tax on petroleum products

ISLAMABAD: The government on Sunday jacked up the petroleum levy on POL products for pocketing at least additional Rs4 to Rs5 billion through consumption of two major products petrol and diesel, reported The News.

The petroleum levy on diesel has been increased by Rs7.05 to Rs25.05 per litre. If the government did not increase the PL (petroleum levy) on diesel, diesel would be cheaper by Rs7.05 per litre. 

The petroleum levy on petrol increased by Rs4.75 to Rs19.75 per litre. If not increased, the petrol would have been cheaper by Rs4.75.  The PL on kerosene up by Rs6.33 to Rs12.33 per litre. 

The PL on light diesel up by Rs1.94 to Rs4.94 per litre. If not increased, the light diesel would have been cheaper by another Rs1.94, the publication reported.

The government had made commitments with the International Monetary Fund (IMF) for increasing non-tax revenues in order to compensate the revenue shortfall being faced by the Federal Bureau of Revenue (FBR). 

The FBR’s target was initially envisaged at Rs5.555 trillion that was revised downward to Rs5.238 trillion on the eve of first review with approval of Advisor to PM on Finance Dr Abdul Hafeez Shaikh and Governor State Bank of Pakistan (SBP) Dr Reza Baqir. 

Against the revised target, the FBR’s shortfall stands at Rs325 billion in the first eight months. Now the FBR will have to collect Rs2524b in the remaining four months (March-June) to achieve its revised target. 

Read also: Govt slashes price of petrol by Rs5

The tax authorities had proposed to achieve collection target by increasing non-tax revenues and save the IMF programme from derailment. The revised fiscal plan relied heavily on SBP profit and increased the petroleum levy.

Now after getting implementation on additional measures, the IMF’s Executive Board will consider approval of third tranche worth $450 million under $6 billion Extended Fund Facility (EFF).

However, the government has adopted this course of path for increasing non-tax revenues because it does not become part of the federal divisible pool (FDP) under National Finance Commission (NFC). 

If the government had decided to raise GST on POL products, then it has become part of FDP and the provinces would have lion’s share out of it in accordance with resource distribution formula under the NFC. 

Keeping in view the increased FBR’s shortfall, the government took the decision to jack up petroleum levy under the IMF programme because the POL prices had tumbled in the international market. 

Read also: Petrol prices to remain unchanged for February

'Govt would pocket additional Rs4 to Rs5 billion'

When contacted, former finance minister and renowned economist Dr Hafeez Pasha on Sunday said that the petroleum levy was increased for the purpose not to pass on full benefits of reduced prices into the international market.

“If the full benefits of reduced oil prices passed on consumers, the prices of petrol would have fallen close to Rs100 per litre in the domestic market,” he said.

Pasha added that the government increased non-tax revenues because it wanted to avoid its distribution with the provinces. He recalled that during the previous government’s tenure, GST on diesel had once touched 51 per cent rate but at that time the levy was not increased up to such an extent. 

Read also: Amid fuel shortage reports in Karachi, PSO says 'sufficient' petrol stocks available

Pasha added that the government would pocket additional Rs4 to Rs5 billion into its pocket with increased petroleum levy on two major products petrol and diesel on a monthly basis.

However, sources said the Oil and Gas Regulatory Authority  had staggered reduction in prices through its calculation as the proposed reduction should have been on higher sides. 

Originally published in The News