5-20 percent cut in petroleum products prices on the cards

[Naveed Yaseen]

ZAFAR BHUTTA
ISLAMABAD (May 15 2009): The Petroleum Ministry is considering proposing 5-20 percent reduction in prices of petrol and high speed diesel (HSD) following the direction of Supreme Court to provide relief to the masses. The proposals will be forwarded to Prime Minister Syed Yousuf Raza Gilani for formal approval within a week.

Sources revealed to the Business Recorder on Thursday that the Petroleum Ministry had finalised the proposals that included options of 5-10-15 and 20 percent reduction in prices of petrol and HSD. The price of petrol will decline by Rs 3.88 per litre calculated at five percent; Rs 7.76 per litre at 10 percent; Rs 11.64 per litre at 15 percent; and Rs 15.52 per litre reduction at 20 percent.

The current price of petrol is Rs 57.66 per litre and the government is currently charging Rs 18.51 per litre petroleum development levy (PDL) on petrol. The reduction in price will be adjusted in PDL that would result in declining PDL collection, said the sources.

According to the proposal, if the Prime Minster approves the first option of five percent reduction, the HSD price will be of Rs 3.86 per litre; a decline of Rs 7.72 per litre if calculated at 10 percent reduction; Rs 11.58 per litre at 15 percent reduction and Rs 15.44 per litre reduction if calculated at 20 percent. The government is currently charging Rs 14 per litre PDL on HSD.

The sources revealed that the government was currently collecting over Rs 17 billion PDL per month on petroleum products and if the Prime Minister approved five percent reduction in prices of petrol and HSD, the government might lose at least Rs 2-3 billion PDL per month.

The government is currently collecting Rs 19.56 per litre PDL on HOBC; Rs 8.79 per litre on kerosene oil; Rs 6.89 per litre on light diesel oil (LDO); rupees three per litre on JP-1, JP-4 and JP-8. This is in addition to general sales tax (GST) of Rs 4.99 per litre on JP-1; Rs 2.26 per litre on JP-8; Rs 7.95 per litre on petrol; Rs 9.94 per litre on HOBC; Rs 7.15 per litre on kerosene oil; and Rs 6.62 per litre on LDO.

The sources further said the government had earmarked collectio of Rs 106.6 billion PDL during first 10 months (July-April) of the current financial year. To-date, it had collected Rs 73 billion PDL during the first nine months (July-March) of the current financial year of 2008-09, said the sources.

According to the sources, the government is still to recover billions of rupees PDL from oil refineries. The PDL has been calculated at Rs 18.435 billion in March; and Rs 17.696 billion in April due to slight increase in global oil prices.

The Finance Ministry was expecting to collect Rs 150 billion PDL during the current financial year and was unlikely to achieve the projected PDL if the prices of petroleum products were slashed as per the directives of the Supreme Court, the sources said.

http://www.brecorder.com/index.php?id=38385