Next fiscal year: Govt likely to keep petroleum levy target unchanged

It will seek to collect Rs120 billion by increasing the levy.

ISLAMABAD:

The government is likely to set the target for petroleum levy on oil products at Rs120 billion for next financial year 2012-13, which is the same as fixed for the current year.

A senior official of the Ministry of Petroleum and Natural Resources told The Express Tribune that initial working suggested that the target for petroleum levy would be Rs120 billion next year starting July. Though this year the target was the same, but it may remain unmet due to a reduction in the levy to mitigate the impact of high global oil prices.

World oil prices are currently declining with demand expected to drop because of huge discoveries of shale gas reserves in the US, keeping markets under pressure.

The decline in oil prices will give leeway to the government to increase the petroleum levy in the upcoming budget to collect additional revenue from sales of petroleum products to consumers.

However, an energy expert pointed out that global demand for energy would not fall as Japan’s liquefied natural gas (LNG) needs had increased due to closure of nuclear plants there following last year’s earthquake and tsunami. He expected crude oil prices to stay above $100 per barrel.

The expert said consumption of high-speed diesel (HSD) in Pakistan stood at 6.9 million tons in previous financial year, but its demand was dropping due to high prices and conversion of coasters and buses to compressed natural gas (CNG). “HSD consumption may stand slightly lower at 6.8 million tons in the ongoing financial year,” he added.

The government had fixed petroleum levy for different oil products. For high octane blending component, the levy was Rs14 per litre, for petrol it was Rs10 per litre, for high-speed diesel Rs8 per litre, for kerosene oil Rs6 per litre and for light diesel oil Rs3 per litre.

But the levy was later reduced to ease the impact of high international oil prices. At present, the government is mostly charging less than the fixed rate. It is collecting Rs11.84 per litre on high octane blending component, Rs8.86 per litre on petrol, Rs4.20 on high-speed diesel, Rs5.15 on kerosene oil and Rs3 on light diesel oil.

In the first 10 months of the current financial year (July-April), Rs51.77 billion has been collected in petroleum levy on oil products compared to collection of Rs60.08 billion in the corresponding period of previous year. With only two months left before the close of financial year on June 30, the Rs120 billion yearly target is unlikely to be achieved.

According to breakdown, the government bagged Rs26.12 billion in petroleum levy from sales of high-speed diesel, Rs24.92 billion from petrol, Rs90 million from high octane blending component, Rs580 million from kerosene oil and Rs60 million from light diesel oil.

Published in The Express Tribune, May 20^th, 2012.