The federal government has increased the levy on petroleum products by up to 300% to minimise its revenue losses instead of letting consumers completely benefit from the reduction in global oil prices caused by coronavirus-induced lockdowns.
On Thursday, the government had reduced the prices of high-speed diesel and petrol by Rs27.15 per litre and Rs15 per litre respectively for the month of May. Similarly, the prices of light-diesel oil and kerosene oil were also slashed by Rs15 per litre and Rs30.01 per litre.
A senior finance ministry officer told The Express Tribune that contrary to Ogra’s recommendations, the government had decided against passing on the complete benefits of the dip in international oil prices to consumers and increased the levy on petroleum products to adjust the losses.
The government already charges 17% general sales tax (GST) on all petroleum products.
The official said Ogra had proposed decreasing the price of high-speed diesel by Rs33.94 per litre and setting it at Rs73.31 per litre. However, the government reduced it to Rs80.10 per litre and increased the levy on the product by Rs6.79 per litre – an increase of 24%.
Similarly, the regulatory authority had recommended a cut of Rs20.68 per litre in the price of petrol and decreasing it to Rs75.90 per litre. Instead, it was reduced to Rs81.58 per litre and the levy jacked up by Rs5.58 per litre or 24%.
Against Ogra’s proposal to slash the price of light-diesel oil by Rs24.57 per litre to Rs37.94 per litre, the government set it at Rs47.51 per litre. It increased the levy on the product by Rs11.18 per litre or 273%.
The highest levy hike was on kerosene oil – 300%. The regulatory authority had suggested a reduction of Rs44.07 per litre and setting the new price at Rs33.38 per litre. However, the government decreased the price to Rs47.44 per litre and increased the levy by Rs18.02 per litre which was Rs6 per litre earlier.
The official said the public could have reaped the full benefits of the drop in global oil prices and the prices could have been reduced further by Rs5.5-Rs9 per litre on petroleum products if the government had not increased the levy.
During the tenure of the previous PML-N government, the petroleum levy was charged in the range of Rs3 to Rs10 per litre, however, GST was higher than the current rate.
As GST is shared with the provinces, the federal government has slashed the sales tax and has hiked the petroleum levy in a bid to collect more revenue for the federal purse to meet its requirements.