On Sunday the government reduced the prices of all petroleum products except High-Speed Diesel (HSD) in order to partially pass on to the masses the impact of a massive international price reduction. The new rates stay in place until June 30.
By doing so, the government raised the oil levy rate on petrol by more than 26pc to mop up additional windfall revenues of around Rs6.5bn. The petrol levy has been raised from Rs23.76 per liter to the maximum permitted limit of Rs30 per liter.
After consultations with representatives of the International Monetary Fund, the Ministry of Finance announced the decision in a balancing act to share the drastic fall in international oil prices among consumers already severely affected by the lockdown of Coronavirus.
Under the announcement petrol ‘s ex-depot price was currently set at Rs74.52 per liter from Rs81.58 per liter, showing a reduction of Rs7.06 or 8.65pc. Based on the current tax rates and the import costs of the PSO, the price of petrol would have dropped by Rs13.30 per liter, but the government has decided to amend Rs6.24 per liter’s oil levy. As such, the GST and petroleum levy share now work out at about Rs40.45 per liter. The product is mostly used in private, small, and two-wheeler transport.
On the other hand, the ex-depot price of high-speed diesel was set at Rs80.15 per liter, up from its current cost of Rs80.10 by a nominal 0.05 paisa per liter. The overall tax and levy now stand at about Rs41.65 per liter, more than double the real diesel rate. The HSD is used mainly in heavy-duty vehicles and agricultural engines such as trucks, buses, tractors, tube-wells, and thrashers, etc.
The government has set the ex-depot price of kerosene oil for June at Rs35.56 per liter instead of Rs47.44 per liter at present, down Rs11.88 per liter (25pc).
Light Diesel Oil (LDO) ex-depot prices have also been set at Rs38.14 per liter instead of Rs47.51 per liter at present, showing a reduction of Rs9.37 per liter or around 20pc. The LDO is used mainly in flour mills and a few power plants.
Benchmark Brent oil prices fell by a huge 80pc to $16 a barrel in May after February. That is the steepest drop in recent history in oil prices.
An official said the finance ministry needed to account for revenue losses resulting from lower import parity rates for crude and petroleum products and lower demand due to the lockdown and total revenue deficit that it had faced during the first 11 months of the current fiscal year.