KARACHI: Consumers are likely to take an expensive ride in 2022-23 as the budget proposes to raise the target of petroleum levy to Rs 750 billion from Rs 610 billion in 2021-22.
The public is already struggling to cope with the steep hike of Rs 60 per liter in petrol and diesel prices, which came into effect a fortnight ago. This has put additional pressure on the cost of living, which has already risen due to rising food prices and rising electricity and gas bills.
Sameer Najmul Hussain, owner of a petrol pump in Karachi, said the previous government was gradually increasing the petroleum levy to meet the condition set by the International Monetary Fund (IMF). However, it removed the general sales tax (GST) to give some relief to the consumers. Petrol price had increased from Rs 150 per liter to Rs 160 a few months back, but the then government led by PTI reduced it to Rs 140 per unit.
He said the next three to four months would be tough for the people as the government would try to meet the IMF’s condition of increasing petroleum levy as well as levying GST on oil products.
Mr. Hussain said that the government will soon increase the price of petrol and diesel by Rs 25-30 per liter. Prices are expected to remain in the range of Rs 280 to Rs 300 per unit in the next four to six months.
When diesel was available at Rs 141.62 per unit in January, he said, GST was Rs 7.31 and petroleum levy was Rs 17.13 with no price difference claim (PDC). Now the price of diesel is Rs 204.15 per liter but GST and petroleum levy are zero. However, the PDC is Rs 23 per liter versus Rs 53 per liter as on June 1.
When the price of petrol was Rs 144.82 per unit on January 1, the petroleum levy and sales tax were Rs 17.62 and Rs 3.53 per liter respectively. At that time the PDC was zero.
At the current petrol price of Rs 209.86 per litre, petroleum levy and GST are nil. The PDC was Rs 39.32 per liter on June 1 and Rs 9.32 per liter on June 3.
He said that if the prices of finished petroleum products fall in the world markets and the rupee strengthens against the dollar, the government would at least be able to maintain petroleum prices instead of raising them substantially.
Ghiyas Paracha, a pump owner in Lahore, said that the government should encourage CNG in public transport, which would reduce the transport charges by at least 43 per cent. In addition, it will also reduce the import bill by $2.1 billion due to the lower volume of imported fuel.
An analyst at Sherman Securities was of the view that the 2022-23 budget is inflationary due to levying of fuel as well as reduction in subsidies. To meet the petroleum levy target, the government will have to increase oil prices by Rs 30 per liter, which is unlikely to happen in an election year.
However, he said, the government would be in trouble for not immediately announcing measures to assuage the IMF’s concerns over revenue and subsidies. Further, the allocation of the levy indicates the government’s intention to raise oil prices by up to Rs 250 per litre. He expressed hope that the average consumer price index inflation would rise to 13.5 per cent by 2022-23.
Published in Dawn, June 11, 2022