Due to an increase in the levy to Rs 55 per litre on fuel, the government collected Rs 75 billion in July 2023 on account of the petroleum levy (PL), a crucial source of revenue for the federal government because it is not part of the divisible pool.
If this trend continues over the next 11 months, the government will be able to exceed its lofty PL budgeted target of Rs 869 billion by Rs 31 billion.
In July, the first month of the current fiscal year, petroleum consumption fell by 6% compared to the same month last year. Petroleum product usage remained steady month on month in July 2023 compared to the prior month.
On the condition of anonymity, a Petroleum Division official stated that the administration is concerned about a further drop in consumption, which could jeopardise the government’s ability to reach budgeted targets. In such a scenario, he continued, the government wants to raise the PL to Rs 60 per litre, the maximum amount set by an agreement with the IMF under the Stand-By Arrangement (SBA) and a component of the Finance Act 2023-24.
According to the source, the government expects to collect Rs 70 billion in PLs in the current month as a result of the Rs 17.50 and Rs 20 per litre increases in fuel and high-speed diesel (HSD) prices.
Under the present SBA, the government has agreed to the IMF that it will follow the route of escalation to reach average pricing of Rs 55 per litre during the current fiscal year, which will contribute an additional Rs 79 billion. Currently, the government charges Rs 55 per litre PL for petrol and Rs 50 per litre for HSD.
Any increase in the price of petroleum products will fuel inflation by increasing the cost of transportation (both goods and persons) and input costs for the productive sectors.
According to oil industry experts, petrol prices are projected to rise further by the end of this month, owing to the continuous devaluation of the rupee against the US dollar, which will restrict petrol use in the country.
During the previous fiscal year, the government realised Rs 580 billion PL against a target of Rs 855 billion, with a Rs 275 billion deficiency.
The collection of PL in the first quarter (July-September 2022) was Rs 47.476 billion due to a lower PL rate of Rs 10 on petrol and Rs 5 on HSD. However, revenue was up to Rs 177.805 billion in the first two quarters (July-December) and Rs 362.480 billion in the first three quarters of the previous fiscal year (July-March 2023).
Total petroleum product consumption declined by 27% year on year in the fiscal year ending June 30, 2023. It declined from 22.6 million metric tonnes in 2021-22 to 16.61 million metric tonnes in 2022-23 (July-June).
