Price of petrol likely to rise by 7%

ISLAMABAD: While global oil prices remain relatively steady and the rupee depreciates against the dollar, petrol consumers are likely to face an increase of Rs5.28 per litre from November 1.

In a summary moved to the petroleum and finance ministries on Thursday, the Oil and Gas Regulatory Authority (Ogra) suggested raising the price of petrol by Rs5.28 per litre, high speed diesel (HSD) by Rs3.34 per litre, high octane blending component (HOBC) by Rs5.73 per litre, kerosene oil by Rs3.89 per litre and light diesel oil (LDO) by Rs2.70 per litre.



However, following the advice of the finance ministry, the final decision would be taken by Prime Minister Nawaz Sharif on October 31.

The government had kept oil prices unchanged for this month. The government was likely to pass on the increase to the consumers in a bid to continue revenue collection. If the oil prices are raised, the government would be able to collect more money on account of General Sales Tax (GST). The price of HSD may rise to Rs85.38 from Rs82.04 per litre. The possible increase would directly impact the transport and agriculture sectors, which use the commodity widely, and cause further inflation.

The price of petrol may jump from Rs73.76 to Rs79.04 per litre. Use of petrol had increased with the reduction in its price and the unavailability of compressed natural gas (CNG). The government is currently providing liquefied natural gas (LNG) for CNG retail outlets, but the supply has been irregular.



Kerosene oil is used for cooking purposes in remote areas where liquefied petroleum gas (LPG) is unavailable. Its price may rise to Rs61 from Rs57.11 per litre.

The price of LDO, used in industries, may jump to Rs56.29 from Rs53.59 per litre, while the price of HOBC, used in luxury vehicles, may be hiked from Rs79.79 to Rs85.52 per litre.

While the GST rate set by parliament is 17 per cent, the Nawaz administration has been using its administrative prerogative to temporarily increase tax rates on oil products amid falling oil prices to keep its revenues steady.



The government derives nearly a quarter of its revenues from taxing the energy sector, and had promised to abandon the practice of using administrative statutory regulatory orders (SROs) to change tax rates, but has yet to do so and, in fact, has used it to take the tax rate on diesel to as high as 50 per cent in recent months.

The current tax rates are 24 per cent for HOBC, 30 per cent for kerosene oil and 29.5 per cent for LDO. For petrol, the sales tax rate was increased from 25.5 to 26 per cent, and for HSD it was raised from 45 to 50 per cent this month.

With the new tax rates on HSD and petrol, the government estimates that it would collect Rs31 billion sales taxes on all petroleum products during October.



Moreover, the government is likely to collect Rs12 billion during the current month on account of the levy on all petroleum products.

Published in The Express Tribune, October 30^th, 2015.