PETROL UNDER HEAVY TAXES

By AZAM ALI 
June 14 - 20, 2004

Years old, heavy government taxes on petrol now have come under strong criticism by the economists, industrial circles as well as general public. Over 125 percent government levies have forced retail petrol rates at Rs. 37.02 while its ex-refinery rate per liter is only Rs. 16; while the HOBC with the ex-refinery rates of 16.50 per liter is being sold at a retail price of Rs. 40.97 per litre.

Apart from Rs. 0.88 Excise Duty and Rs. 5.00 as Sales Tax there are Rs. 10.00 to Rs. 13.00 as Petroleum Development Levy on both the super quality and HOBC. The petroleum levy about 100% was imposed years ago in order to build a cushion for consumers as petroleum prices were revised in past after every year especially during annual budgets. Fluctuation in import prices used to be adjusted with the levies amount. Government earned billions of rupees through Petroleum Development Levy during last two decades and was supposed to reduce the levy whenever import prices goes up. Not only this but government was supposed to even give subsidy from the levy amount in order to keep POL prices within the reach of the citizens.

If government had given a slight subsidy from the Petroleum Development levy collected during last two decades, citizens could have easily bought petrol only at the rates of Rs. 15.00 per litre, which is being sold at the rate of Rs. 37.20

The questionable Petroleum Pricing Mechanism has increased the prices of all products of daily use especially power and transportation.

However, Petroleum Development levy on diesel is lower than super, which resulted retail prices at Rs. 24.47, it may be mentioned that diesel's ex-refinery prices per liter are also about Rs. 14.36. Government has exempted diesel from Excise Duty and Sales Tax since last year after aggressive protest from the transporters and wheel jam strikes.

Ridiculously, the Oil Marketing Companies (OMC) operating in Pakistan, Oil Companies Advisory Committee (OCAC) and Federal Government is refusing to talk about the heavy government levies and taxes. All of these institutions refuse to even meet the media people in this regard. One of the official from OCAC on the condition of unanimity said that the OCAC, and Oil Marketing Companies have been instructed by the government to keep the levy detail secret. Not only this but some officials are busy with confusing citizens with minor factors, like demand and supply situation, traders margin, freight charges, difference of oil transportation through dirty tankers and clean tankers and inland transportation charges etc. They are trying to befool the citizens with the jugglery of words over above issues and completely neglecting the one of the most important factor of heavy government levies being collected in billions of rupees since last two decades.

Being an essential product in all over the world, petroleum products prices are kept lower in order to strengthen the national economy and industries, but here the situation is just opposite.

Apart from transporters not a single circle including petroleum dealers, political parties, industrialists have come up with firm stand on this issue so far. Major political parties are ignoring this sensitive issue because heavy taxes on petrol remained one of the major sources of money minting for them during their regimes.

The most important and sensitive essential item has been given in the hands of OMCs and OCAC under the cover of deregulation following which Federal Government and Oil Companies are minting money at the cost of sharply increasing poverty level.

Since last two years more Oil Marketing Companies are arriving in retail business as the government has declared Pakistan as an open field to mint the money in petrol business.

In Karachi the state-run Pakistan State Oil is loosing market share in a result of aggressive marketing by Shell Pakistan. Although PSO has 153 outlets in Karachi while Shell has 104 outlets. Caltex oil is upgrading the outlets to capture more retail share with its 66 outlets in the city.

All over Sindh, PSO has more than 727 outlets, Shell has 305 and Caltex 132, but retail sale of Shell is higher than PSO. In Punjab PSO has 2,170 outlets and Shell has 710, Caltex has 241, Attock Petroleum and Total PARCO Pakistan 15 and 8 respectively. In Sindh, both new Oil Marketing Companies Total and Attock have opened new outlets in the good locations.

PSO has more than 3,838 outlets in Pakistan including Azad Jammu and Kashmir, Shell Pakistan has more than 1,269, Caltex has 466, Attock Petroleum has 29 and Total PARCO has more than 12 outlets.

Nation was also deprived of a major relief in the shape of grant given by the Saudi Kingdom, which started after nuclear tests during Mian Nawaz Sharif's government. Relief in petroleum prices not given till today, however, government kept POL prices under control for political reasons during the months of presidential referendum and US attack on Afghanistan and Iraq. Sources said that government adjusted the loss from the levies collected during last two decades.

Early this year, provincial ministers for transport and home department had taken this issue in the Federal Capital after law and order situation erupted on POL prices in Karachi. But they returned with the instruction that they should never interfere into the POL prices in future. Political parties too are afraid of this issue and do not even comment whenever POL price issue is raised by the citizens.