ISLAMABAD: Amid major revenue shortfalls, the government on Monday increased the price of liquefied petroleum gas (LPG) by more than 11 per cent while the rates of all other petroleum products remained unchanged for October to earn more than Rs4.2 billion in windfall revenue over lower international prices.
The Oil and Gas Regulatory Authority (Ogra) had recommended up to 2.6pc cut in local petroleum products in line with falling international oil prices. However, the government decided to earn as much additional revenue because of around Rs100bn first quarter shortfall in revenue target.
Interestingly, the government did not pass on the benefit of lower international oil prices to consumers on the premise that it expected increase in prices next month. “The government has decided to maintain the prices of petroleum products at the current level to offset expected increase in the prices for the month of November 2019,” said the Ministry of Finance in a statement.
An official said the government would earn about Rs2.4bn additional revenue on high speed diesel (HSD) in October while another Rs1.7bn windfall would accrue on account of unchanged petroleum prices. The government has repeatedly been saying that it would pass on to the consumers in case of any reduction in international prices when these were going up. Some minor windfalls would also flow in from light diesel oil prices.
LPG prices raised by 11pc
The finance ministry said the ‘decision to retain the September prices of petroleum products for the upcoming month of October has been taken in view of the petroleum prices in the international market showing increasing trend from mid-September 2019 and the expectation that the prices might remain on the higher side in the month of November 2019’.
The Ogra had calculated up to 2.6pc reduction in the prices of major petroleum products for October as crude prices declined to $59 per barrel in the Middle East by end of August from $63per barrel at July end. Based on import parity price of Pakistan State Oil (PSO), Ogra had worked out about Rs3.23 per litre decrease in the price of HSD, Rs2.55 per litre in petrol and Rs2.41 per litre for the price of light diesel oil (LDO). On the other hand, the regulator had worked out an increase of Rs1.19 per litre for kerosene oil.
In view of the government decisions, the ex-depot price of HSD and LDO will remain unchanged at Rs127.14 and Rs113.24 per litre. Likewise, the ex-depot price of kerosene oil and LDO would also remain at the existing level of Rs99.57 per litre and Rs91.89 per litre.
A separate notification would be issued by the federal board of revenue to increase tax rates that currently stand at standard rate of 17pc across the board. Besides the 17pc GST, the government has more than doubled the rate of petroleum levy on HSD in recent months to Rs18 per litre instead of Rs8 per litre, while levy on petrol had also been increased by 50pc to Rs15per litre instead of Rs10 per litre. The petroleum levy on kerosene oil and LDO remains unchanged at Rs6 and Rs3 per litre, respectively.
Over the last few months, the government has started increasing petroleum levy rates to partially recoup a major revenue shortfall faced by the Federal Board of Revenue. The levy remains in the federal kitty unlike GST that goes to the divisible pool taxes and thus about 57pc cent share is grabbed by the provinces.
The petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country. Total HSD sales are touching 800,000 tonnes per month against monthly consumption of around 700,000 tonnes of petrol. The sales of kerosene oil and LDO are generally less than 10,000 tonnes per month.
Simultaneously, the Ogra notified about 11.14pc increase in the price of LPG for October to Rs125.05 per kg, up Rs12.53 per kg from Rs112.54. As such, the price of 11.8kg domestic cylinder price went up by Rs147.87 to Rs1,475.63 instead of Rs1,328.
The Ogra said the producers’ price of LPG (propane 40pc and butane 60pc) had been determined at Rs67,214.83 per tonne against Rs56,504.52 tonne September. This price included excise duty of Rs85 per tonne. The producer price was thus worked out at Rs793.13 per 11.8kg cylinder.
Published in Dawn, October 1st, 2019
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