Increase in Petroleum Levy May Cause Another Fuel Price Hike: Report

The Government of Pakistan (GoP) has promised an increase in Petroleum Development Levy (PDL) to the International Monetary Fund (IMF) for the loan program restoration.

The government has sent a letter of intent (LoI) — signed by Minister for Finance Miftah Ismail and Governor State Bank of Pakistan Dr. Murtaza Syed — to IMF, guaranteeing an increase of up to Rs. 50 on PDL.

The government will also impose a mini-budget that will likely include more taxes on traders, bankers, and other businessmen. The budget will bridge the financial discrepancy that occurred due to tax reliefs for the aforementioned parties.

A Turn of Fate

According to previous reports, the government was to reduce the fuel prices following the oil price reduction in the international market. Instead, the government increased the petrol price by Rs. 6 per liter, bringing it back to Rs. 233 per liter.

The finance minister gave the following explanation for the hike:

OGRA takes the average of Platt prices, adds freight and premium paid by PSO on top of these prices, and multiplies that by the exchange rate. In addition it also “trues up” the previous fortnight’s cost by taking into account the rupees paid by PSO at the actual exchange rate as opposed to the average used to estimate the previous fortnight’s cost. We have not added any new tax or levy to the price. The price of petrol has gone up (and diesel has gone down) because the cost paid by PSO in the previous fortnight was more than the cost estimated by OGRA and also because the premium paid by PSO on petrol increased and premium paid on diesel remained unchanged. Again, not one paisa of new taxes or levies was added.

Also, the government recently increased the profit margins of petroleum dealers. The dealers’ margin on diesel has been increased by Rs. 2.97 per liter, while that on petrol has gone up by Rs. 2.10. These developments have almost confirmed the fuel price hikes in the coming days.