ISLAMABAD:
Prime Minister Shehbaz Sharif on Friday increased the prices of high speed diesel and petrol by Rs27 per liter when no increase was required in petrol rates and to hike its price, the Prime Minister imposed nearly Rs27 per liter additional tax on fuel.
Accordingly, the price of high-speed diesel has been fixed at Rs 380.2 per liter compared to Rs 353.42 per litre. This represents an increase of 7.5%. Diesel prices are still significantly lower than their peak of Rs520.4 on April 10. Diesel is considered the most inflationary fuel due to its widespread use in the freight transportation and agriculture sector.
The Prime Minister approved the increase in petrol prices to Rs 393.4 per liter from Rs 366.6. This represents an increase of 7.3% over the existing prices. Petroleum Division officials said there was no change in gasoline prices in the international market and the rates had to be increased due to the tax increase.
The Finance Ministry spokesperson was not available for comment.
The new petroleum levy rate on petrol was set at Rs 107.4 per liter as Shehbaz Sharif again opted to recoup the tax meant to be recovered from diesel consumers from petrol consumers – a policy he had previously implemented and then canceled after public backlash.
Last month, the Prime Minister increased the cess rate on petrol to a record high of Rs 160 per liter amid a surge in prices. Later, the Prime Minister took credit for reducing the tax to Rs80.
The sources said the International Monetary Fund has asked the government to start imposing a tax of Rs 80 per liter on diesel and petrol. Instead of introducing an oil tax on high-speed diesel, the Prime Minister initially increased the tax on petrol to Rs 107.4 per litre.
The IMF still demands that the tax be further increased by Rs 53 per litre. The sources said the government would take the decision next week whether the remaining tax of Rs 53 per liter should be recovered from diesel or petrol users.
Finance ministry sources said the government has already collected a little over Rs 1.2 trillion in oil levy in the first nine months of this financial year. This is equivalent to 82% of the annual target of Rs1.468 trillion.
Yet the government has chosen to further increase the burden on gasoline consumers, mainly poor motorcycle owners and car owners from the lower middle income groups to the highest income groups.
Prime Minister Shehbaz Sharif’s government is trying to appease diesel users, but this could end up angering both diesel and gasoline consumers as prices remain on the rise in both categories.
The government had earlier reduced the federal development budget by 17 per cent, or Rs 173 billion, to offset the impact of the reduction in oil tax on diesel and partially subsidize the product.
The government currently collects a tax of around Rs 36 per liter on diesel, including Rs 33 as customs duty and Rs 2.5 as climate support levy. Total tax on petrol stands at Rs 134 per litre, including Rs 107 as petroleum tax, Rs 24 as customs duty and Rs 2.5 as climate support tax.
As per the agreement with the IMF, the climate support levy would be further increased by Rs 2.5 per liter on both products, reaching Rs 5 per liter from July 1.
Government officials remained unable to convince the IMF to relax punitive conditions, even in wartime. The demand for a further increase in oil levy rates and the climate support tax shows the negotiators’ lack of convincing power.
The IMF is expected to approve the fourth tranche of the loan and the third review of the $7 billion bailout plan in the first week of May.
Due to the decline in global prices, the rates of premium kerosene and light diesel have been reduced. Kerosene prices have been reduced from Rs429 per liter to Rs365 per litre. There is a reduction of Rs63.6 per liter on the price of kerosene. The government imposes a petroleum tax of 20.4 rupees per liter.
Prices of light diesel have been reduced from Rs299 to Rs270 per liter, a reduction of Rs29 per litre. The price includes oil tax of Rs 15.8 per liter.
