On Saturday, Miftah Ismail, the new government’s potential candidate for becoming the Finance Minister, took to Twitter to announce that the government might have to retract its recent decision in which it rejected the Oil and Gas Regulatory Authority’s (OGRA) summary to increase the price of petroleum products. Miftah wrote on Twitter that the “decision announced last night” to continue with the prevalent subsidies “was a tough one and will have to be revisited.” He added that at the current pricing, the “government was losing Rs. 21 per litre on petrol and Rs. 52 per litre on diesel.” He estimated that at this rate, the government would lose Rs. 250 crore per day or Rs.3600 crore in two weeks, which is far more than the expense of “running the entire civilian federal government plus the entire BISP/Ehsaas programme.”
Miftah then went on to blame the preceding government for its mismanagement and mishandling of the economy, adding that the PTI government has “tied our hands” by committing in writing to “recover full cost of fuels and impose Rs 30 per litre levy and 17% sales tax on those fuels.” Finally, Miftafh underscored that according to the commitments made by the PTI government, the price of petrol and diesel should be Rs. 236 p/l and Rs 264 p/l, respectively. It is, however, still unclear where the price of petroleum products would stand after the review.
Read More: PML-N govt. refuses to increase petrol prices
To clarify, earlier, Oil and Gas Regulatory Authority (OGRA) proposed a price hike in the per litre cost of petrol and high-speed diesel. According to the proposed bill, the authority suggested an increase of Rs. 83.5 per litre on petrol and Rs. 119 on the per liter cost of diesel.
According to sources privy to the matter, the suggested price hike was made on the basis of full levy and taxes – 70 percent GST and Rs. 30 levy on per liter cost of the commodity – and not the prevalent rates. For the two commodities, the current levy stands at Rs. 30 per litre, and approximately 17 percent GST is charged on it.
It is pertinent to mention that OGRA always depicts two options while submitting a proposal for a change in the price of any commodity; one with the full taxes and the other with the prevalent taxes. It was learnt that the price increase suggested by the authority according to the prevalent taxes was Rs. 21.5 per liter on petrol and Rs. 51.3 per liter on diesel.
Read More: Petrol prices to surpass Rs. 200 per liter
Analysts believed that the incumbent government would be forced to increase petrol and diesel price under the agreement with the International Monetary Foundation (IMF), especially after former Prime Minister Imran Khan on 1 March slashed Rs. 10/liter off the prices in petrol and diesel. Shortly after the decision to cut Rs.10 in petrol prices, the IMF review committee slammed the government’s decision and expressed its dissatisfaction with the government’s implementation of its commitments. It further inquired the government how it would fund the $1.5 billion subsidy announced by the Prime Minister.
Pakistan went to the IMF in 2019, and under the agreement, Pakistan is to receive about US$6 billion for a period of 39 months, and so far, it has received almost half it.
The IMF program is scheduled to end in September.