If the government does not raise existing tax rates, petrol costs may increase by up to Rs8 per litre for the next 15 days. According to various reports, the government is still undecided if it should raise fuel taxes beginning November 1 or December 16. The overwhelming opinion is that the price hike should be stopped by mid-November in order for prices to stay stable as the exchange rate began to drop.
On the basis of current tax rates, import parity prices, and exchange rates, the Oil & Gas Regulatory Authority (Ogra) and Petroleum Division have determined that petrol and high-speed diesel will cost around Rs6 per litre more than they did prior to August 8th. The rise in other goods such as kerosene, light diesel oil, and diesel was projected to be approximately the same because of the devaluation of the US dollar and a higher international oil price over the previous 10-12 days of import cargos.
A proposed increase of Rs4 per litre in the levy is under consideration.
The oil ministry is considering raising the petroleum tax by Rs4 per litre, possibly on Sunday or November 16, and would await the IMF’s feedback on its plan for recovery before taking action.
The government has already announced several steps to increase revenue, including raising taxes on oil products. The government had set an annual target of Rs610 billion in revenue through the petroleum levy at an average rate of about Rs50 billion per month, but actual collection in the first four months was only about Rs50 billion. The government currently charges roughly Rs5.62 per litre for petrol and Rs5.14 for HSD tax.
In addition, petrol and HSD are taxed at a rate of Rs9.29 per litre and Rs8.81 per litre by the government, as well as a total of Rs9 and Rs13 per litre in GST.
After further negotiations with the Prime Minister on Sunday, the Ministry of Finance would make a final decision regarding the price rise.
The ex-depot price of petrol is now Rs137.79 per litre. The product is mostly utilized in private transportation, small automobiles, rickshaws, and two-wheelers and has a significant influence on the mid- and lower-middle-class budgets. At present, HSD’s ex-depot price is Rs134.48. Because it is primarily used in heavy transport vehicles, trains, and agricultural engines such as trucks, buses, tractors, tube-wells threshers), its cost is considered highly inflationary.
The price of Light Diesel Oil (LDO) at the ex-depot is Rs 108.35 per litre, followed by kerosene at Rs 110.26 per litre. Kerosene is widely used to adulterate petrol and, to some extent, for lighting in remote regions. Flour mills and a few power stations consume LDO.
The government earns the majority of its revenue from petrol and HSD, which are two huge and rapidly growing products that contribute a great deal to the country’s economy. Average petrol sales reach 750,000 tons each month against an average monthly consumption of 800,000 tons of HSD. Kerosene oil and LDO sales are typically less than 11,000 and 2,000 tons per month.
Under the new mechanism, the government analyzes prices on a weekly basis in order to reflect international rates published by Platt’s Oilgram rather than utilizing the prior approach of monthly calculations based on Pakistan State Oil import cost.