Major cut: Govt lowers fuel prices by up to Rs12.8 per litre

Imposes additional five per cent general sales tax on all petroleum products

ISLAMABAD:

The government on Saturday announced another drastic cut in fuel prices this time by up to Rs12.82 per litre from February 1 (today). However, it also imposed an additional five per cent general sales tax (GST) on all petroleum products in order to earn a windfall of Rs23 billion.

The Oil and Gas Regulatory Authority (Ogra) had recommended slashing petrol rates by Rs10.75 per litre, Rs8.80 on high speed diesel (HSD), Rs14.85 on high octane blending component (HOBC), Rs12.92 on kerosene oil and Rs11.44 on light diesel (LD).



However, the government decided to reduce Rs7.99 on per litre petrol, Rs12.82 on per litre HOBC, Rs10.48 on per litre kerosene, Rs5.62 on per litre HSD and Rs9.56 on per litre LD.

Following the cuts, the price of petrol has come down from Rs78.28 per litre to Rs70.29. The price of the HSD has come down from Rs86.23 to 80.61. The price of kerosene has fallen from Rs71.92 to Rs61.44. The price of HOBC has declined from Rs92.13 to Rs79.31 while the price of the LD has come down from Rs67.50 to Rs57.94 per litre.

Though the decline in international fuel prices has translated into relief for consumers, it has also provided an opportunity to the government to make money from fuel and power consumers.  During the last few months, the government imposed Rs2.5 per unit power surcharge on consumers to retire bad debt of power distribution companies while it was supposed to pass on the benefit of reduction in petroleum prices to consumers in the form of fuel price adjustment.

The government wants to impose Rs1.5 per unit more power surcharge on power consumers. It has also imposed 10 per cent additional GST on the fuel consumers to deprive them of the full relief, following a decline in global oil prices in a bid to make its upcoming talks with International Monetary Fund (IMF) in Dubai a success.



A senior government official said Islamabad expects to earn Rs4 billion from the additional five per cent GST during the month of February. On January 1, the government made a five per cent raise in the GST after increasing it from 17% to 22%.  With an additional five per cent increase, the GST now stands at 27%.

“The government has collected Rs17 billion from GST on petroleum products during the month of January and the collection will rise to Rs23 billion in month of February,” an official said, adding that government will also be collecting Rs10 billion from fuel consumers on account of Petroleum Levy (PL) on petroleum products.

Officials said government’s claim to lose revenue following decline in oil prices was not true as demand of petroleum products has jumped up. Due to rise in consumption of petroleum products, the revenue collection has also increased but government is using it as an easy tool to make more money from the fuel consumers.

In the month of January, consumers in Punjab faced severe petrol shortages, which the government had attributed to the rising demand. According to the petroleum ministry, demand for  petrol had jumped up by 30% on month to month basis following decline in prices.


Published in The Express Tribune, February 1^st, 2015.