ISLAMABAD:
Prime Minister Shehbaz Sharif on Friday raised the prices of both high-speed diesel and petrol by Rs27 per litre, despite the fact that there was no need for a hike in petrol prices, and to push up the price, the prime minister imposed almost Rs27 per liter more tax on fuel.
Hence, the high-speed diesel price has been fixed at Rs 380.2 per litre, up from Rs 353.42 per litre. This is an increase of 7.5%. Diesel prices are still significantly lower from their peak of Rs 520.4 on April 10. Diesel is considered the most inflationary fuel due to its widespread use in the freight transport and agricultural sectors.
The Prime Minister approved raising petrol prices to Rs 393.4 per litre, up from Rs 366.6. This shows an increase of 7.3% compared to the existing prices. Petroleum Division officials said there was no change in petrol prices in the international market and the rates had to be hiked due to the increase in duty.
A spokesman for the Ministry of Finance was not available for comment.
The new kerosene tax rate on petrol has been fixed at Rs 107.4 per liter as Shehbaz Sharif again opted to collect the tax to be collected from diesel consumers from petrol consumers – a policy he had earlier implemented and then reversed after public backlash.
Last month, the prime minister had hiked the oil tax rate on petrol to a record Rs 160 per liter amid soaring prices. Later, the premier took credit for reducing the tax to Rs80.
The sources said the International Monetary Fund has asked the government to start charging Rs80 per liter tax on diesel and petrol. Instead of introducing kerosene tax on high-speed diesel, in the first step, the Prime Minister has raised the tax on petrol to Rs 107.4. per litre.
There is still a demand from the IMF to further increase the levy by Rs 53. per litre. The sources said the government would take the decision next week whether the remaining Rs 53 per liter tax must be collected from diesel or petrol users.
Finance Ministry sources said the government has already collected a little over Rs1.2 trillion in oil tax during the first nine months of this fiscal year. This is equivalent to 82% of the annual target of Rs 1.468 trillion.
Yet the government has chosen to further increase the burden on consumers of petrol, mostly poor motorcycle owners, and car owners belonging to the low-middle income to the highest income groups.
Prime Minister Shehbaz Sharif’s government is trying to appease diesel users but may end up irking both diesel and petrol consumers as prices were still increasing for both categories.
The government had earlier cut the federal development budget by 17% or Rs 173 billion to offset the impact of the reduction in oil duty on diesel and partially subsidize the commodity.
The government currently levies around Rs 36 per liter tax on diesel, including Rs 33 in customs duty and Rs 2.5 as climate subsidy levy. Total taxes on petrol amount to Rs134 per litre, including Rs107 kerosene tax, Rs24 duty and Rs2.5 climate subsidy tax.
According to the agreement with the IMF, the climate subsidy levy would be further increased by Rs 2.5 per liter on both products, reaching Rs 5 per litre. from 1 July.
Government officials remain unable to convince the IMF to ease the penalty even during times of war. The demand to further increase oil tax rates and the climate support tax shows the negotiators’ lack of persuasion.
The IMF is expected to approve the fourth loan tranche and the third review of the $7 billion bailout in the first week of May.
Due to reduction in global prices, superior kerosene oil and light diesel oil have reduced. Petroleum prices have been reduced from Rs429 per liter to Rs365 per litre. There is a reduction of Rs 63.6 per liter in kerosene oil price. The government levies Rs20.4 per liter oil tax on it.
The prices of light diesel have been reduced from Rs 299 to Rs 270 per liter – a reduction of Rs 29 per litre. The price is inclusive of Rs15.8 per liter kerosene tax.
