Tag: Petroleum levy

  • Petrol prices expected to see notable increase next week

    Petrol prices expected to see notable increase next week

    Consumers already grappling with the burdens of inflation may soon face another blow as reports indicate an imminent hike in petroleum prices within the country.

    Recent assessments suggest a potential increase in petrol prices by over Rs9 per liter commencing April 1. This surge could propel the new price range for petrol from Rs279.75 to Rs289.25.

    Furthermore, there are indications that the government is contemplating raising the petroleum levy from Rs60 to Rs100.

    The petroleum development levy has undergone various adjustments in recent fiscal years, witnessing a notable escalation during FY-2023.

    Sources reveal that the federal government is deliberating a proposal to either subject petroleum to General Sales Tax (GST) or elevate the existing levy rate to fulfill IMF requisites for reinstating an 18 per cent GST on petrol.

    The proposed budget for the upcoming financial year outlines plans to increase the petroleum levy from Rs60 to Rs100 per liter.

    Presently, a levy of Rs60 per liter is imposed on both petrol and diesel, yielding an estimated annual revenue of Rs950 billion. Since March 2022, GST on petroleum products has been maintained at zero levels.

    In the initial budget drafts, GST was slated to be set at 18 per cent, in alignment with International Monetary Fund stipulations calling for the restoration of the standard GST rate.

    On March 15, the government opted to maintain the price of petrol while reducing the cost of high-speed diesel by Rs1.77 per litre.

    Petrol prices, fuel prices, government policy, petroleum levy, inflation, consumer concerns,

  • Govt surpasses petroleum levy collection targets despite declining sales

    Govt surpasses petroleum levy collection targets despite declining sales

    In the first six months of fiscal year 2023–24, the federal government has exceeded expectations by collecting Rs472.77 billion in petroleum levy (PL), constituting an impressive 54 per cent of the total budgetary estimates for PL on petroleum products for the current fiscal year.

    This collection marks a significant uptick, registering a remarkable 166 per cent increase compared to the same period in the previous fiscal year. The government achieved a substantial PL collection of Rs222 billion in the initial three months of the current fiscal year.

    Originally budgeted at Rs869 billion for PL collection in the fiscal year 2023–24, the government revised its target to Rs918 billion following an increase in PL from Rs50 to Rs60 per litre on petrol and high-speed diesel (HSD). This adjustment aligns with the government’s commitment to the International Monetary Fund (IMF).

    However, against this backdrop of successful revenue generation, the country witnessed a notable 15 per cent decline in the sales of petroleum products in the first six months of the current financial year.

    According to the Oil Companies Advisory Council (OCAC), petroleum product sales dropped to 7.68 million tonnes, a considerable decrease from the 9.03 million tonnes recorded during the same period in the previous fiscal year (July to December).

  • Govt reduces petrol price by Rs8 to Rs259.34 per litre for next fortnight

    Govt reduces petrol price by Rs8 to Rs259.34 per litre for next fortnight

    In a significant move, the caretaker government announced a substantial reduction in the price of petrol by Rs8 per litre for the upcoming fortnight, effective January 16.

    This decision, as conveyed in a notification issued today by the Finance Division, aligns with the recommendations put forth by the Oil and Gas Regulatory Authority (OGRA).

    The adjusted ex-depot price of petrol now stands at Rs259.34 per litre, reflecting a notable decrease from the previous rate of Rs267.34 per litre.

    However, it is important to note that there have been no alterations in the prices of high-speed diesel, light-diesel oil, or kerosene oil.

    The government has already reached the maximum permissible limit under the law, with a Rs60 per litre petroleum levy imposed on both petrol and high-speed diesel (HSD).

    This levy is in line with the commitments made to the International Monetary Fund (IMF), aiming to collect Rs869 billion during the current fiscal year.

    Optimistically, the government anticipates surpassing this target, with the collection expected to exceed Rs950 billion by the end of June.

    Petroleum and electricity prices have been identified as key contributors to inflation, which surged to 29.7 per cent in December, as indicated by the Consumer Price Index.

    Presently, the government imposes a tax of approximately Rs82 per litre on both petrol and HSD.

    This adjustment in petrol prices not only provides relief to consumers but also marks a strategic step by the caretaker government to manage fiscal targets while considering the economic impact on the general population.

    The move is anticipated to have ripple effects on inflation rates, offering a temporary respite from the cost of living for the common citizen.

  • Pakistan expected to increase petroleum levy to get IMF loan 

    Pakistan expected to increase petroleum levy to get IMF loan 

    Pakistan has reportedly provided assurances to the International Monetary Fund (IMF) regarding an augmentation of the petroleum levy in the fiscal year 2024–25, aligning with its intentions to embark on a new loan programme. 

    According to documentation cited by sources within the finance ministry, Pakistan has committed to elevating the petroleum levy to Rs1,065 billion in FY2024–25, anticipating a revision of the current levy target from Rs869 billion to Rs918 billion.  

    The attainment of the revised target is contingent upon an uptick in the consumption of petroleum products. 

    The sources additionally revealed that the caretaker government would have implemented a Presidential Ordinance if adjustments were to be made to the current petroleum levy target. 

    Earlier revelations indicate that Pakistan is poised to secure another financial assistance package from the International Monetary Fund (IMF) subsequent to the conclusion of the existing standby agreement. 

    The caretaker government has initiated consultations in preparation for the forthcoming IMF programme. 

    Sources have indicated that talks between the government and the IMF for the new loan programme are likely to commence this month.  

    Finance ministry officials underscored the commitment of the elected government to advance the measures established by the caretaker government. 

  • Govt expected to hike petrol price on Thursday

    Govt expected to hike petrol price on Thursday

    In the final fortnight of November 2023, the per litre price of petrol in Pakistan is projected to experience an increase of Rs3.18, while high-speed diesel (HSD) is anticipated to undergo a reduction of Rs8.30 per litre on Thursday, November 16.

    Sources have indicated that the pricing trajectory of petroleum products is poised for a mixed trend in the latter half of the current month of November 2023.

    The price of petrol is forecasted to rise from Rs283.38 per litre to Rs286.56 per litre, marking an uptick of Rs3.18 per litre.

    Correspondingly, the cost of HSD/diesel is expected to decrease by Rs8.30 per litre, moving from Rs303.18 per litre to Rs 294.88 per litre.

    Additionally, the price of kerosene oil is projected to witness a decline of Rs5.61 per litre, transitioning from Rs211.03 per litre to Rs205.42 per litre.

    Furthermore, the price of light diesel oil (LDO) is set to experience a reduction of Rs8.33 per litre, shifting from Rs189.46 per litre to Rs181.13 per litre.

    These price adjustments are calculated based on current government taxes and the prevailing US dollar exchange rate, as per informed sources.

    According to Profit, the government may uphold the price of petrol due to outstanding forex adjustments, while a reduction of Rs10 per litre is expected for diesel (HSD).

    Notably, starting from 1st November 2023, the government has imposed a petroleum levy (PL) of Rs60 per litre on petrol and diesel, alongside receiving an Inland Freight Equalization Margin (IFEM) of Rs7.71 per litre on petrol and Rs0.60 per litre on diesel.

    Additionally, the Dealers’ Margin (inclusive of extra margin) on petrol and diesel presently stands at Rs8.64 per litre.

    Similarly, the margin for Oil Marketing Companies is fixed at Rs7.87 per litre.

    Furthermore, the Distributors’ Margin (inclusive of extra margin) on diesel is currently set at Rs8.12 per litre, and on petrol, it is Rs7.87 per litre, effective from 1st November 2023.

    On 1st November, the government maintained the prices of petrol and diesel at Rs283.38 per litre and Rs303.18 per litre, respectively.

    Simultaneously, the price of kerosene oil witnessed a reduction of Rs3.82 per litre, establishing the new price at Rs211.03 per litre.

    The price of LDO was also decreased by Rs3.40 per litre, fixing the new price of LDO at Rs189.46 per litre for the first half of November 2023.

  • Govt collects Rs75 billion from consumers in one month through petroleum levy

    The Pakistani government collected a significant sum of Rs75 billion in revenue from the petroleum levy (PL) in July 2023. This levy is a crucial income source because it’s not part of the divisible pool. The increase in the petrol levy to Rs55 per litre has driven this boost in revenue.

    If this pattern continues for the remaining 11 months of the fiscal year, the government could surpass its ambitious budget target for the petroleum levy. The target of Rs869 billion might be exceeded by a notable Rs31 billion.

    In July, the first month of the fiscal year, petroleum consumption decreased by 6 per cent compared to the same month in the previous fiscal year. However, when we look at the month-to-month basis, petroleum product consumption remained constant in July 2023 compared to the previous month.

    An anonymous source from the Petroleum Division, speaking to Brecorder, expressed the government’s concern about the potential decline in consumption. Such a decline could jeopardise meeting the budget goals. However, the government has a plan in place. If needed, the petroleum levy could be increased to Rs60 per litre, which is the maximum limit according to an agreement with the IMF under the Stand-By Arrangement (SBA) and the Finance Act 2023–24.

    Predictions for the current month point to a collection of Rs70 billion from the petroleum levy due to recent price increases of Rs17.50 per litre for petrol and Rs20 per litre for high-speed diesel (HSD).

    The government has committed, under the ongoing IMF SBA, to gradually raising the levy rate to an average of Rs55 per litre over the fiscal year. This strategic move is estimated to bring in an additional Rs79 billion. Currently, the government enforces a petroleum levy of Rs55 per litre on petrol and Rs50 per litre on HSD.

    Keep in mind that any rise in the petroleum levy on fuel products could lead to inflation, increasing transportation costs for goods and people as well as input expenses for various sectors.

    Oil industry experts speculate that gasoline prices might increase further by the end of the month. This projected increase is mainly due to the ongoing depreciation of the Pakistani rupee against the US dollar, which is likely to reduce gasoline consumption.

    In the last fiscal year, the government collected Rs580 billion from the petroleum levy, falling short of the Rs855 billion target by Rs275 billion.

    During the first quarter of the fiscal year 2022–23 (July–September 2022), the collection of the petroleum levy was Rs47.476 billion. This lower amount was due to the lower levy rates of Rs10 on petrol and Rs5 on HSD. Subsequently, collections increased significantly to Rs177.805 billion in the first two quarters (July–December) and further to Rs362.480 billion in the first three quarters (July–March 2023) of the previous fiscal year.

    It’s noteworthy that total consumption of petroleum products dropped by 27 per cent year-on-year in the fiscal year ending on June 30, 2023. Consumption decreased from 22.6 million metric tonnes in the fiscal year 2021–22 to 16.61 million metric tonnes in 2022–23 (July–June).

  • International petrol, diesel prices drop, but no relief for Pakistanis

    The government has decided not to reduce the prices of diesel and petrol for local consumers, despite a significant decrease in their international prices. This decision is intended to offset previous exchange losses and raise taxation.

    On February 28, 2023, the average fortnightly prices of petrol and diesel in the global market will be used for the next price revision. According to industry sources, the average price of diesel for the next fortnightly review has dropped by $7 per barrel, which equates to a reduction of Rs30 per litre for domestic diesel prices.

    The global average price of diesel has fallen to approximately $100 per barrel compared to $107 per barrel in the previous fortnight. Similarly, the average price of petrol has dropped to $90 per barrel for the next review of prices compared to $93 per barrel in the last fortnightly review, which translates into a reduction of Rs10 per litre for consumers in the local market.

    According to Geo, the appreciation of the Pakistani rupee against the dollar in the last two weeks has also contributed to the reduction in import prices of diesel and petrol. However, industry sources do not expect any significant reduction in the prices of diesel and petrol for domestic consumers.

    The government is expected to adjust the exchange losses, which were not passed on fully to the oil sector in the last several reviews. For example, an exchange loss adjustment of Rs88 per litre was due on diesel, but the government only transferred Rs12 per litre on this head, leaving the remaining amount to be adjusted. The same is true for petrol, with an exchange loss adjustment of Rs34 per litre due, but only Rs12 per litre being given to the oil industry.

    Under the conditions set by the International Monetary Fund (IMF), the government may increase the petroleum levy (PL) on diesel to Rs50 per litre, as it now has room to do so. Currently, the PL on diesel is Rs40 per litre.

    If the government does not impose GST, sources expect a cut of Rs10 per litre in diesel prices, which would otherwise deprive local consumers of the drop in diesel prices in the global market.

    However, official industry sources do not anticipate any reduction in the price of petrol for local consumers, which would otherwise have been down by Rs10, as per the trends of its price in the global market.

  • Govt expected to increase petroleum levy on diesel

    Govt expected to increase petroleum levy on diesel

    The government is expected to raise the petroleum levy beginning tomorrow, implying that diesel customers are unlikely to receive any relief. 

    Finance Minister Ishaq Dar is also anticipated to maintain the oil prices for the first two weeks of December.

    The government now has the flexibility to raise the rate of PL on diesel, a crucial good that is extensively utilised in the transportation and agricultural sectors, thanks to the recent rise in PL on gasoline and High-Octane Blending Component (HOBC) to the budgeted level of Rs50 per litre.

    However, this change will directly affect how the majority of people live. High-speed diesel (HSD) is currently priced per litre at Rs12.59. However, according to sources, the price of diesel had decreased by Rs11.95 per litre during the past two weeks. Diesel prices could decrease to Rs223.35 per litre from Rs235.3 per litre if the government decides to pass along the savings.

    Despite the rupee losing Rs1.81 to reach Rs223.62, the cost of diesel, kerosene, and light diesel oil (LDO) fell significantly. The current rate of PL and GST is the basis for the variation in oil prices.

    The Inland Freight Equalization Margin has been set at Rs1.90 for HSD and Rs6.69 for gasoline per litre. The exchange loss for Pakistan State Oil was Rs3.01 for gasoline and Rs2.10 for HSD per litre.

    PSO imports goods, therefore it may experience exchange gains or losses depending on how much the local currency is worth. Kerosene oil prices also decreased by Rs9.91 per litre, and LDO prices decreased by Rs13.39 per litre.

    In isolated locations without access to LPG, kerosene oil is used for cooking. Kerosene oil’s price could decrease from Rs191.83 to Rs181.92 per litre and LDO’s price from Rs186.50 to Rs173.11 per litre if the government grants relief.

    Petrol prices have increased by Rs2.62 per litre, with a potential increase to Rs227.42 per litre from the current level of Rs224.80 per litre.

  • IMF asks Pakistan to reduce expenses before loan talks

    IMF asks Pakistan to reduce expenses before loan talks

    The International Monetary Fund (IMF) has asked Pakistan to reduce expenses before talks on the ninth review of a $7 billion loan programme.

    Discussions between Pakistan and the IMF are still underway, but no party has reached a broad agreement on a revised macroeconomic framework for the current fiscal year.

    According to The News, the ninth review’s conclusion and the distribution of the $1 billion tranche might not happen until the following calendar year 2023 as a result of the ongoing negotiations.

    The discussions went on for weeks, but the two parties were unable to agree to begin policy-level discussions to wrap up the approaching ninth review by the end of November.

    Although both Pakistan and the international lender are keeping quiet and refusing to make any public statements, rumours in the background indicate that the talks broke down due to disagreements over the revised macroeconomic and fiscal framework that Islamabad had prepared and shared with the IMF.

    Pakistan must now put in a lot of effort to finish the review by the first week of December 2022. If the negotiations are successful next month, the IMF will ultimately release the next tranche in January 2023 because the Christmas and New Year holidays start after that date. The Executive Board of the multilateral lender will meet the following year to approve Pakistan’s next tranche.

    The News had approached both IMF and Finance Ministry officials to inquire about the exact schedule for the conclusion of the pending review. One close aide of Minister for Finance Ishaq Dar stated that “discussions were going on Zoom. Insha Allah soon (the review will be concluded).”

    The new macroeconomic and fiscal framework for 2022–23 is being contested by the IMF because it thinks the goals are unattainable and at odds with actual conditions.

    The government anticipated nominal growth in the range of 25 per cent, with real GDP growth of 2 per cent and an average inflation rate of 23 per cent, however, the other numbers did not line up with the revised nominal growth estimates.

    The government has not revised the $7.47 trillion yearly objective set by the Federal Board of Revenue (FBR). The IMF, however, thinks that the reduction of imports may result in a shortfall for the tax collector. Second, assuming FBR met its goal, the tax-to-GDP ratio would decline even lower because it did not equal the nominal growth statistics of 25 per cent. Third, the aim of Rs2 trillion in non-tax revenue also might not be met.

    The government had set a target of Rs855 billion before the next budget, therefore the IMF highlighted that the petroleum development levy may not completely materialise. Because the government was unable to impose a fee of Rs50 per litre on diesel and because the consumption of petroleum products fell by 21 per cent, the levy target may now be reduced downward to Rs500 billion.

    Another obstacle to reaching agreement was the government’s failure to pass legislation and reforms to the energy industry.

    Given that the State Bank of Pakistan’s (SBP) reserves currently stand at $7.8 billion, the delay in finalising the IMF agreement could exacerbate the economic problems already plaguing the nation.

  • Forced stabilisation of oil prices causes oil industry to face over Rs7 billion in losses: OCAC

    Forced stabilisation of oil prices causes oil industry to face over Rs7 billion in losses: OCAC

    Maintaining oil prices for the second consecutive fortnight could harm the oil industry and disrupt petroleum products supply. The oil industry claims that it has suffered a loss of over Rs7 billion due to the government’s plan to keep oil prices artificially low.

    The nation’s oil industry protested against the government’s “manipulation” of the pricing system in its most recent fortnightly review to keep ex-depot petroleum product prices the same for the next 15 days.

    “This forced stabilisation of oil prices at the cost of the industry is not sustainable and will severely impact the already crippled oil industry,” wrote the Oil Companies Advisory Council (OCAC) — an umbrella organisation of more than three dozen oil marketing companies (OMCs) and refineries — to the Ministry of Energy on Wednesday.

    Following political pressure from the opposition Pakistan Tehreek-i-Insaf (PTI), the government declared on Tuesday that all product prices will remain unchanged. However, market participants, including Ogra, had predicted hikes in POL prices beginning on November 16.

    The oil sector claimed that the government was maintaining the rates in defiance of the long-standing pricing system. Over the next 15 days, the oil industry is expected to lose more than Rs7.6 billion as a result of the unilateral shift in pricing.

    According to the OCAC, the price freeze would result in losses for OMCs of Rs8.34 on each litre of petrol and Rs7.15 on each litre of high-speed diesel (HSD), totaling Rs7.55 billion.

    Even though the rates were rising in accordance with the pricing methodology set by the government itself, it claimed that the prices of motor fuels had remained the same for the second fortnight of November. Instead of passing on the increase or absorbing the increase by lowering the petroleum levy, it was claimed that the price components were “very forcefully and unjustly reduced.”

    “The industry is already facing a severe financial crunch due to high global prices, depreciation of the rupee, increased charges on confirmation of letters of credit, high premiums on import, etc and will not be able to survive if these unfair adjustments are not removed immediately”, the OCAC wrote to the Oil and Gas Regulatory Authority (Ogra) and the Petroleum Division.

    According to Dawn, inland freight equalisation margin (IFEM), a collection of transportation fees paid to OMCs, was decreased by Rs3.21 and Rs2.72 per litre on petrol and HSD, respectively, according to the OCAC. According to sources, the Ministry of Finance called the senior Ogra officials on Tuesday night to make these cuts.

    On gasoline and HSD, respectively, the exchange loss adjustment was also decreased by Rs3.01 and Rs2.11 per litre. Additionally, the long-awaited increase of OMC’s sales margins from Rs2.68 to Rs6 per litre was approved by the ECC on October 31. With another loss of Rs2.32 per litre on both products, the “revised margin for both products has not been incorporated in the prices.”

    Based on estimated sales volumes for the second fortnight of November from Ogra, the OCAC estimated a total loss of Rs7.55 billion, including Rs4.25 billion for petrol and Rs3.30 billion for HSD.

    The “forced price stabilization” could pose problems for the supply chain and jeopardise the industry’s survival, according to the OCAC, given the lower stock levels and higher import volume requirements.