Petroleum products: OGRA recommends upward revision in oil prices

Summary sent to petroleum ministry, comes as price of crude surged

ISLAMABAD: The regulator has recommended an increase in the prices of petroleum products of up to 19.9% from July after the rates of crude oil surged in international markets.

The Ministry of Petroleum received a summary from the Oil and Gas Regulatory Authority (Ogra) on Wednesday that recommended an upward revision in oil prices.

Prices of all petroleum products, except kerosene oil, are deregulated and Ogra only monitors their prices.

The final decision will be taken by Prime Minister Nawaz Sharif.

The government has the capability to absorb the impact of the proposed increase in oil prices by adjusting tax rates on petroleum products.



Despite a decline of over 50% in global prices, consumers have largely been denied a full relief due to hefty taxes. The increase in tax rates comes as Pakistan continues to suffer from a revenue shortfall and a tax-to-GDP ratio that is one of the lowest in the region.

At present, two types of taxes are being charged from oil consumers including petroleum levy and general sales tax.

The Ministry of Finance may oppose any proposal for keeping oil prices unchanged in the latest revision as it would affect the country’s revenues.

Breakdown

Following the global price rise, the effect could be felt in prices of petrol, high-speed diesel (HSD), light diesel oil (LDO), kerosene oil and high octane blending component (HOBC).

According to Ogra’s summary, the Ministry of Petroleum officials said the consumers of HSD, which is mostly used in the transport and agriculture sectors, may face a hike of Rs3.75 (5.2%), taking the price to Rs76.27 per litre from the existing Rs72.52.

Petrol price may go up from the existing Rs64.27 to Rs66.20 per litre, an increase of Rs1.93 (3%).

The price of kerosene oil - used for cooking in remote areas where liquefied petroleum gas is not readily available - may be increased from Rs43.25 to Rs51.87 litre; an increase of Rs8.62 (19.9%).

Similarly, LDO - mainly used for industrial purposes - may record an increase of Rs5.38 (14.2%), taking the price from Rs37.97 to Rs43.37 per litre.

The price of HOBC used in luxury cars may rise by Rs3.53 (4.9%) taking the rate to Rs76.21 from Rs72.68 per litre.

While the prices of JP-1, JP-4 and JP-8 may be increased by Rs4.29 (9.6%) Rs1.95(5%) and Rs2.14 (5%) per litre respectively.

Published in The Express Tribune, June 30^th, 2016.

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