Reduction will impact Rs 8 billion on revenue for December: minister

Federal Minister for Petroleum Ghulam Sarwar Khan has said that reduction in petroleum prices would have negative impact of Rs 8 billion on revenue for the month of December. Talking to Business Recorder on Friday, the minister said the government had already passed on half of the impact of petroleum prices for month of November which had Rs 10 billion impact on revenue collection.

From December 1, 2018 the Federal Board of Revenue (FBR) has increased sales tax on diesel from 12 percent to 13 percent while for petrol it has been increased from 4.5 percent to 8 percent for the current month. However, the sales tax on petrol is still low as compared to the standard rate of sales tax which is 17 percent.

The petrol price has gone down from the existing Rs 97.83 per litre to Rs 95.83 per litre with a reduction of Rs 2 per litre. The CNG is an alternate fuel but its consumption has declined due to ban of indigenous gas in CNG outlets in Punjab province. The demand of petrol has increased now and CNG outlets in Punjab province are using imported gas. The government has also reduced price of high speed diesel (HSD) by Rs 2 per litre. The HSD is widely used in transport and agriculture sector. With this decrease, its price has gone down to Rs 110.94 per litre from Rs 112.94 per litre. Similarly the government has slashed kerosene oil price by Rs 3 per litre from existing Rs 86.50 to Rs 83.50 per litre. The kerosene oil is used in remote areas like northern parts of Pakistan where LPG is not available for cooking purpose.

The government has reduced price of light diesel oil (LDO) by Rs 5 per liter from existing Rs 82.44 to Rs 77.44 per litre. The LDO is used in industry.

The Oil and Gas Regulatory Authority (OGRA) had recommended increase in prices of petroleum products by calculating them at 17 percent general sales tax (GST). However, the government has reduced rate of petroleum levy (PL) on petrol from Rs 10 to Rs 6.15. Sales tax on HSD has been reduced from 27.5 percent to 12 percent or cut from Rs 8 to Rs 6.56.

According to Ministry of Finance, the OGRA works out the petroleum prices for a month on the basis of the prices of cargoes purchased for that particular month. The prices for December 2018 are accordingly based on the purchases made during the period from October 10 to November 12, 2018. The average price of these cargoes remained $76.68/BBL for petrol and $86.61 for HSD.

The government has substantially reduced the taxes/levies on petroleum products during the period September-November 2018. During the month of November, sales tax on MS and HSD was 4.5 percent and 12 percent respectively, compared to 15 percent and 27.5 percent in May 2018, which means a reduction of 10.5 percent and 15.5 percent respectively. Similarly petroleum levy on MS and HSD which was Rs 10 and Rs 8 per liter in May last has been reduced to Rs 6.15 and Rs 6.51 respectively.

The international prices of crude oil are on a declining trajectory. The government intends to provide relief to the consumers in the determination of final consumer prices, while keeping in view the revenue requirements.