By rejecting the Oil and Gas Regulatory Authority’s (OGRA) proposal to reduce prices of petroleum products considering a rapid drop in international oil prices, the government has yet again failed to provide relief to the common man.
By maintaining the same prices and increasing the sales tax, the government aims to make up for yet another shortfall in meeting its revenue targets.
Reduction in International Prices, Not in Pakistan
International crude oil prices have fallen sharply over the past five months. Brent crude and WTI reported price reduction of about $5 to $6 per barrel. The same change has not trickled down to the Pakistani consumers, who end up being overcharged by the government.
Increased Sales Tax
Now, the government has increased general sales tax (GST) on high speed diesel (HSD) from 29 percent to 33.5 percent. Petrol has seen a GST increase from 15.5 percent to 20 percent. It is worth mentioning that aggregate taxes already amount to about 50 percent of the final price.
To pass on the impact of decline in international oil prices, OGRA had recommended a price reduction of Rs. 1.20 and Rs. 1.10 per liter on petrol and HSD, respectively. The public was expecting a price reduction in the region of Rs. 2 per liter.
However, OGRA’s recommendation to increase prices of light diesel oil (LDO) and kerosene oil were not accepted. The government has also maintained zero percent sales tax and other duties on these petroleum products.
Misrepresentation of Facts by the Govt
Both these products have a limited market and hold little importance in terms of revenue generation for the government. In recent times, HSD and petrol sales have surpassed 800,000 and 700,000 tonnes, respectively. Kerosene and LDO sales are generally less than 10,000 tonnes per month.
According to an official, the government will be making additional revenue of at least Rs. 1.3 billion on diesel and Rs. 1 billion on petrol. Compared to that, even if there had been any taxes on LDO and kerosene the government could only have made a few million rupees.
Despite this, Finance Minister, Ishaq Dar, and Prime Minister, Nawaz Sharif, are claiming to have offered relief to the common man by not increasing prices of kerosene and LDO prices.
Encouragement for Fraudsters
On the other hand, kerosene and LDO are being misused across the country as dishonest market operators continue to mix them with 92RON petrol and diesel. This adulterated petrol is being sold at market prices looting people of their hard earned cash. OGRA had recommended price increases for these two products so that a reduced price differential would put off these scamming oil distributors.
By not increasing the prices for these products, an environment is being created which encourages scammers to continue looting the public by selling them low quality fuels. The government has also deregulated most oil products and doesn’t hold pump owners accountable so that quality standards can be upheld. Literally, no steps have been taken against these scammers.
One other aspect worth pointing out is that kerosene is a regulated petroleum product but is unavailable at its fixed rate anywhere in the country while all deregulated products are being sold close to the recommended prices in Pakistan. This makes little sense when comparing high use petroleum products with LDO and kerosene.