The federal government on Thursday announced a cut of Rs 15 per litre in the price of petrol, Rs 27.15 per litre in the price of high speed diesel (HSD), Rs 30.01 per litre in the price of kerosene and of Rs 15 per litre in the price of light diesel oil (LDO).
After the reduction, the price of petrol has been cut to Rs 81.58 from Rs 96.58, while HSD will be available at the rate of Rs 80.10 after a reduction of Rs 27.15 from previous Rs 107.25 per litre. The price of kerosene has been reduced to Rs 47.44 from earlier Rs 77.45 per litre while LDO, which was previously priced at Rs 62.51, will now be available at Rs 47.51 per litre.
According to a notification issued by the Ministry of Finance, the government made the decision to slash prices of petroleum products to ‘provide relief to the consumers’. “The government is extending maximum relief to the public. Relief packages include economic stimulus package, Ehsaas emergency relief programme, incentive package for SMEs and many other relief measures. The latest one is [a] considerable decrease in the prices of petroleum products,” the notification read.
The new prices will come into effect from May 1 (today).
Earlier on Wednesday, the Oil and Gas Regulatory Authority (Ogra) had recommended up to Rs 44.07 per litre reduction in the price of major petroleum products for the month of May to share the benefit of lower international prices with the consumers. It had worked out up to 57% cut in various products’ prices with effect from May 1 based on existing tax rates.
At present benchmark Brent crude prices have plunged by a massive 30% to $20 a barrel from about $27 per barrel on March 25 when Pakistan last revised oil prices. The Brent crude price has tumbled by almost 65% since February 25. This is the steepest fall in oil prices in recent history.
Based on the existing tax rates, the Ogra had calculated about Rs 33.94 and Rs 20.68 per litre reduction in the prices of high speed diesel (HSD) and petrol, respectively.
A senior government official earlier said that the Ministry of Finance and the Federal Board of Revenue (FBR) were trying their best to pass on about half of the price reduction calculated by Ogra to consumers and retain the remaining amount as windfall by increasing the rates of petroleum levy. According to him, the finance ministry wanted to make up for revenue losses arising out of lower import parity price for crude and petroleum products and lower consumption due to the lockdown and the overall revenue shortfall it had faced in the first 10 months of the current fiscal.
The official said the prime minister had been told that reduction in HSD price would be a great support to the agriculture sector, currently at the peak of wheat harvest, and would help pull down the rate of inflation because it was the primary source of transportation in the country.
The government has already increased the general sales tax (GST) on all petroleum products to a standard rate of 17% across the board to generate additional revenues.
The levy on petrol has also been almost doubled to Rs 18.90 per litre instead of Rs 10 per litre. The petroleum levy on kerosene and LDO remains unchanged at Rs 6 and Rs 3 per litre, respectively.
Over the last many months, the government had been increasing petroleum levy rates to partially recoup a major revenue shortfall faced by the FBR. The levy remains in the federal kitty unlike GST that goes to the divisible pool taxes and thus about 57% share is obtained by the provinces.
Petrol and HSD are two major products that generate most of revenue for the government because of their massive and growing consumption in the country. Prior to coronavirus-related lockdown, average petrol sales had been touching 700,000 tonnes per month against monthly consumption of around 600,000 tonnes of diesel. The sales of kerosene and LDO are generally less than 11,000 and 2000 tonnes per month, respectively.
Last month the international oil prices had dropped by almost 52% but the government had reduced the local prices by 12-13% to make up for the revenue loss.
Until January last year, the government was charging 0.5% GST on LDO, 2% on kerosene, 8% on petrol and 13% on HSD. Besides the 17% GST, the government has more than tripled the rate of petroleum levy on HSD in recent months to Rs 24.20 per litre from Rs 8 per litre.
