Govt tactfully avoids losing revenue


KARACHI: Federal government has tactfully avoided losing its revenue by reducing the prices of petroleum products in the country.

The federal government reduced the sales tax on the petroleum products whose collection is distributed under Divisible Pool among provinces and increased Petroleum Development Levy (PDL) to ward off any impact on its revenue collection on petroleum products.

An analysis of latest reduction showed that while PSO sale price reduced by Rs 19.98 (55.71-35.73) per litre, consumer price reduced by Rs 15 (96.58-81.58).

Petroleum Levy (included in consumer price but not included in NFC Divisible Pool) increased by Rs 6.60 (23.76-17.16) per litre while federal sales tax (included in consumer price and a constituent of NFC Divisible Pool) reduced by Rs 2.18 (14.03-11.85) per litre.

It suggests that full benefit of reduction (of Rs 19.98 per litre) in price has not been passed on to consumers. But federal exchequer gains through increase in petroleum levy (not being a constituent of the NFC Divisible Pool) while provincial exchequers lose by reduction in federal sales tax (a constituent of the NFC Divisible Pool).

The government had passed on petroleum product prices by an average 26 percent, or Rs 22/liter on average, from last levels, which is 70 percent of what had Oil and Gas Regulatory Authority (Ogra) suggested. The government had also slashed LPG prices by 13 percent.