Stability: Petrol prices remain unchanged

Govt changes taxes slightly to keep revenues from falling

ISLAMABAD: With global oil prices remaining relatively steady, the government decided to keep oil prices largely unchanged, tinkering with the sales tax rate to ensure that the tax rate changes exactly equaled the changes in the cost of the oil to ensure stable prices.

The Oil and Gas Regulatory Authority (Ogra) had determined that, based on import prices, the government could reduce petrol prices by Rs0.15 per litre (0.2%), and high-speed diesel prices by Rs2.68 per litre (3.2%). On the other hand, Ogra had recommended an increase of Rs2.63 per litre (3.3%) for high octane blended component, Rs2.99 per litre (5.2%) for kerosene oil, and Rs2.51 per litre (4.7%) for light diesel oil.



As it currently stands, however, the government will keep all of those prices unchanged. Petrol will remain at Rs73.76 per litre, high speed diesel at Rs82.04 per litre, HOBC at Rs79.79 per litre, kerosene oil at Rs57.11 per litre, and light diesel oil at Rs53.59 per litre. While the general sales tax rate set by Parliament is 17%, the Nawaz Administration has been using its administrative prerogative to temporarily increase tax rates on oil products amidst falling oil prices to keep its revenues steady. The government derives nearly a quarter of its revenues from taxing the energy sector. The government had promised to abandon the practice of using administrative Statutory Regulatory Orders (SROs) to change tax rates, but has yet to do so and in fact has used it to take the tax rate on diesel to as high as 50% in recent months.

The government cut the tax rates on HOBC, kerosene and light diesel oil to absorb the impact of the price increases. The current tax rates are 24% for HOBC, 30% for kerosene oil, and 29.5% for light diesel oil. For petrol, the sales tax rate was increased from 25.5% to 26%, and for high speed diesel, it was raised from 45% to 50%. With the new tax rate on high speed diesel and petrol, the government will be collecting Rs31 billion sales tax on all petroleum products during October. In addition to it, government will collect Rs12 billion on account of the Petroleum Levy (PL) on all petroleum products during the next month.

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