Wednesday, January 5, 2011

Govt may withdraw part of oil rates hike

ISLAMABAD, Jan 3: The government is considering to revoke in a couple of days a part of the 9.2 per cent increase in prices of petroleum products announced three days ago in view of the pressure it is facing from coalition partners and the opposition.

The official said the economic managers were strongly opposed to reducing prices because of international commitments and the resultant revenue loss. “The one who suspends this increase will have to give an alternative,” he said, adding that the government would lose Rs4.5 to 5 billion a month if petroleum prices were reduced.

He said the government would lose Rs850 million if the general sales tax was brought down to last month`s level. The move will reduce prices between 50 paisa to Re1 per litre on different products and the exchequer would lose about Rs4.3 billion. In that case, the prices would drop between Rs4 and Rs7 per litre on various products. If the entire increase was withdrawn, the revenue loss would be of around Rs5 billion, the official said, adding that it was up to the government to decide on the size of revenue loss. “The government can also opt for a middle route of reducing a part of petroleum levy,” he said.

Currently, the government charges petroleum levy of Rs10 per litre on petrol, Rs14 on HOBC, Rs6 on kerosene, Rs8 on high speed diesel and Rs3 on light diesel oil. The GST rate ranges between Rs11 and Rs14 per litre at 17 per cent which fluctuates in absolute terms with international prices.

ISLAMABAD: The allies of the PPP government, opposition as well as common folks have rejected the latest increase in the prices of petroleum products and asked the government to withdraw it and come up with some relief for the already inflation-stricken masses.

The hike in the POL prices was also challenged in the Lahore High Court, praying the court to stay the increase in the prices. While the Pakistan Muslim League -Nawaz (PML-N), Awami National Party (ANP) and Jamaat-e-Islami (JI) have filed adjournment motions in the Senate and National Assembly secretariats to discuss the issue. The Pakistan Tehrik-e-Insaf (PTI) also criticised the government move and has decided to hold protest rallies.

The Pakistan Muslim League-Nawaz (PML-N) also submitted an adjournment motion in the National Assembly Secretariat against the hike in petroleum prices.

Budget deficit to rise by 0.2 percent on oil prices raise withdrawal  

ISLAMABAD  (January 05, 2011) : The budget deficit may swell by 0.2 percent if the government withdrew the oil prices rise, Business Recorder has learnt. The 0.2 percent rise for the remaining six months of the current fiscal year (January-June 2011) is based on the earlier estimates of a 4.7 percent budget deficit for 2010-11, as agreed with the International Monetary Fund (IMF).

The revised estimate of the budget deficit, as per sources in the Finance Ministry, is expected to be around 7.5 percent. If the 7.5 percent budget deficit is taken into account, then the rise in deficit due to withdrawal of the oil prices rise in line with the rise in the international price of oil would be lower.

"If government withdraws the decision of raising oil prices that has resulted in countrywide protests, the government would face a revenue loss of Rs 4.7 billion during the current month," sources said, adding that total revenue loss of over Rs 40 billion would have to be borne during the remaining six months of the current financial year.

The government is currently charging Rs 10 per litre Petroleum Levy (PL) on petrol, Rs 14 per litre on HOBC, Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil and Rs 8 per litre on high speed diesel (HSD). The government is also collecting Rs 11.58 per litre general sales tax (GST) on petrol, Rs 13.71 per litre GST on HOBC, Rs 10.90 per litre on kerosene oil and Rs 10.31 per litre GST on LDO.

The government had estimated collection of Rs 250 billion revenue on account of taxes on petroleum products in ongoing financial year. The option to adjust rising impact of international oil prices in Petroleum Levy (PL) is available to the government. Sources said that the Petroleum Ministry had proposed to the Petroleum Minister not to pass on the rising impact of over Rs 6 per litre to the consumers during ongoing month, saying that it would result in countrywide protests. But the Prime Minister did not heed Petroleum Ministry's suggestion and instead heeded the advice of the Finance Ministry to raise oil prices.

Due to Musharraf government's decision to keep oil prices unchanged, the government was compelled to pay Rs 297 billion subsidy on petroleum products, resulting in circular debt that is still to be resolved," an official said, adding that now the Finance Ministry is also injecting money into the energy sector to clear the circular debt.

The government claims that it has no fiscal space to cut oil prices. But analysts argue that the government should slash current expenditure rather than placing cut in development budget to provide relief to consumers on petroleum products. Presidency, Prime Minister Secretariat and Ministers are advising the masses to bear the brunt of oil prices but are not willing to cut expenses. "After coming into power, almost all ministers and secretaries spent huge amounts of public money on renovation of their offices, a practice indicative of profligacy, sources added.

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