Carbon tax on CNG withdrawn

[Naveed Yaseen]

PEER MUHAMMAD, ZAFAR BHUTTA & ZAHEER ABBASI
ISLAMABAD (June 19 2009): The government on Thursday withdrew the decision of levying carbon surcharge on Compressed Natural Gas (CNG) by deleting the word "carbon" from the head of the levy. Now "surcharge" will be used for taxing petroleum products from the next financial year ie 2009-10 after severe drubbing from different quarters.

Prime Minister Syed Yousuf Raza Gilani announced in the National Assembly to withdraw the decision of imposing carbon surcharge on CNG and directed the Finance Minister to review the levy as a whole taking into account other petroleum products.

Speaking in the National Assembly, the Prime Minister said that the government has withdrawn carbon surcharge on CNG worth Rs 12 billion and "I have directed the Ministry of Finance to review the decision of carbon surcharge and come up with a transparent taxation mechanism."

On the occasion, majority of members in the National Assembly lauded the decision of the government and hailed the Prime Minister's view to look into what the members termed anti-poor tax. The government has recently introduced carbon surcharge in the budget 2009-10, which was widely criticised by the lawmakers of both the Houses of the Parliament.

Majority of the opposition lawmakers were of the view that the decision to impose carbon surcharge was taken to counter the verdict of the Supreme Court that directed the government to reduce petroleum prices in line with global price mechanism.

Meanwhile, Advisor to Prime Minister on Finance Shaukat Tarin informed the Senate standing committee on finance that the government had taken the decision to exempt the CNG industry from the carbon surcharge.

Members of the committee demanded exemption of the kerosene oil from the carbon surcharge. But the advisor said that the government feared adulteration of kerosene oil with other petroleum products if the government exempted it from the surcharge.

The government has taken this decision after members of the Senate body on finance on Wednesday strongly criticised carbon surcharge saying it was to be imposed for friendly environment but use of CNG had no chance of polluting environment.

Analysts are of the view that after exempting CNG from carbon surcharge and its possible imposition on petroleum products would result in price differential that would lead to increase in sale of CNG. CNG dealers are criticising the government to maintain reasonable difference between prices of CNG and petroleum products. Government has targeted collection of carbon surcharge on petroleum products at Rs 122 billion in next financial year ie 2009-10 that would possibly be used to bridge the budget deficit, one analyst said.

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