Govt takes oil prices to a new high

ISLAMABAD: Disregarding recommendations of the Oil and Gas Regulatory Authority (Ogra) to freeze oil prices, the government on Tuesday increased petroleum prices by up to six per cent with immediate effect to generate an additional revenue of Rs3 billion.

“Ogra recommends that POL product prices effective Feb 1, 2012, may be kept unchanged by absorbing the said increase in petroleum levy, to provide relief to public at large,” the authority had written to the government, arguing that receipts from petroleum products had already shown a rise of Rs9.2 billion over the July-December period last year.

Ogra had pointed out that government receipts from petroleum levy and sales stood at Rs153.3 billion against Rs144.1 billion during the same period of last year.

“In case POL prices are kept unchanged, the estimated loss in government revenue will amount to Rs3 billion only, which is within the additional tax revenue of Rs9.2 billion, being earned by the government,” the authority had argued.

To its disappointment, Ogra had to notify an increase in POL prices on the directives of the federal government.

A senior government official said Ogra’s recommendations were overruled for the simple reason that it was the government’s jurisdiction to formulate fiscal policies and fix tax rates.
The decision is in stark contrast with a statement by Prime Minister Yousuf Raza Gilani on his return from Davos on Sunday in which he snubbed Petroleum Minister Dr Asim Hussain for issuing a statement about a rise in oil prices. The prime minister had said the minister “should not have given a statement about oil price increase because it is the domain of Ogra”.

According to a notification issued by Ogra, price of high speed diesel was raised by 4.7 per cent, or Rs4.64, to Rs103.46 from Rs98.82 per litre, petrol (motor spirit) by six per cent, or Rs5.37, to Rs94.91 from Rs89.54 per litre, kerosene by 3.11 per cent, or Rs2.78, to Rs92.02 from Rs89.24 per litre and light diesel by four per cent, or Rs3.43, to Rs90.21 from Rs86.78 per litre.

Prices of JP-1 and JP-8 (aviation fuels) were raised by 1.5 per cent and 3.3 per cent to Rs83.43 and Rs83.13 per litre respectively.

The highest increase of 5.62 per cent, or Rs6.29 per litre, was made in the prices of high octane blending component (HOBC) to Rs118.20 from Rs111.91 per litre.

The increase in petroleum prices was necessitated by about 2.92 per cent rise in transportation cost, mainly because of movement of products from the country’s south to the north due to Parco’s expected shutdown for a month from March 15 and hike in pipeline tariff due to 1.04 per cent devaluation of the rupee against the US dollar.

The government also increased CNG prices by 70 paisa to Rs74.29 per kg for Khyber Pakhtunkhwa, Balochistan and Potohar region and to Rs69.60 per kg for Sindh and Punjab.