Govt rules out restoration of fuel taxes after recent hike

Ismail says PM petrol relief package is for every household with below Rs40,000 monthly income

ISLAMABAD:

The government on Saturday ruled out immediate restoration of fuel taxes and full cost recovery of petroleum products, as it plans to gradually implement the previous political regime’s conditions agreed with the International Monetary Fund (IMF) for revival of the programme.

“Neither are we imposing taxes nor will we fully recover the fuel cost from the consumers at this stage,” Finance Minister Miftah Ismail said while addressing a news conference.

However, the finance minister hoped that a deal would be struck with the IMF by June, which according to him, would open new foreign financing lines.

The minister spelled out the details of the PM’s targeted subsidies for the 37% of the population to shield them from the recent hike in petroleum products prices.

As per the commitment given by former finance minister Shaukat Tarin to the IMF, per litre price of diesel should be Rs300 and that of petrol Rs270, Ismail said, sharing details of the commitments given by the last regime.

After the recent hike, the price of petrol is Rs179.86 per litre, diesel Rs174.15, kerosene oil Rs155.56 and light diesel oil Rs148.31 per litre. Still, the government was giving Rs17 per litre subsidy on petrol and Rs56 on diesel.

He said that the previous government had agreed to impose 17% GST and Rs30 per litre petroleum development levy. Miftah clarified that the former government did not allocate any money for financing fuel subsidies in the budget.

To a question, Ismail said he did not know whether the fuel prices would be increased again starting June 1. But said it would not be appropriate to raise the prices again in a few days since “we have just increased them”.

Read PM Shehbaz unveils Rs28bn relief package for poor to cope with inflation

Prime Minister Shehbaz Sharif on Friday announced a one-time Rs2,000 per family subsidy for 14 million households. The Rs2,000 will be given in June and it will cost the government Rs28 billion. Besides 7.3 million BISP beneficiaries, the package covers 6.7 million households with poverty scores below 37.

“We cannot provide complete relief as we do not have the resources but we will do all we can to dress the wounds of the poor.

“The relief amount would also be incorporated in the upcoming budget which would be presented in the National Assembly next month,” Ismail added.

The minister said the government would also augment the Benazir Income Support Programme (BISP). For the current fiscal year, the BISP budget allocation is Rs250 billion, which the finance ministry had earlier indicated to increase to Rs300 billion.

The minister said that the Rs300 billion allocations for the next fiscal year would have to be increased further to incorporate the fuel subsidy for the poorest households.

He said that the PM petrol relief package has been offered to every household having monthly income of below Rs40,000. People who were already BISP beneficiaries did not need to send their details on 786 since they would automatically receive the amount, he added.

He added that the money given through the relief package amounted to 5% of the income of a household earning less than Rs40,000 monthly and 8% of the income of a household earning Rs31,333 or less monthly.

Read more Rupee recovers to one-week high

Premier Shehbaz said the government took the decision to increase fuel prices to avoid a looming default.

Pakistan on Saturday hoped a deal would be struck with the IMF next month, expecting to get $5 billion more from the global lender in addition to opening blocked external financing pipelines.

The statement was made by Finance Minister Miftah two days after his government increased the fuel prices by one-fourth, rolling out the implementation of a host of conditions that include further increase in fuel and electricity prices for reaching a staff-level agreement.

“We are expecting a staff-level agreement with the IMF in June. Agreement is the real thing, after which money can be deposited at any time,” Ismail said.

“The IMF will give the remaining $3 billion out of $6 billion and we have requested them to extend the programme by a year and expand it by $2 billion,” Ismail said. He hoped that the IMF would agree to the augmentation of the programme’s loan size. The IMF will increase it to at least $7 billion, which “will provide us $4 billion more”, he added.

Ismail said Saudi Arabia was willing to help Pakistan but he would share the details in July. He said that additional financing from China was also expected next week.

“Once the deal with the IMF is revived, Pakistan will also get loans from the World Bank, the Asian Development Bank and Asian Infrastructure Investment Bank and the amount runs into billions of dollars,” Ismail said.