Govt mulls hike in oil levy from Rs 60 to Rs 80 per liter

• The government is considering hiking gas duties, imposing another levy on pol products.
• The Ministry of Finance refuses to allocate a financial grant for the IMF check.
• The move is aimed at addressing the Rs 2.9 tr circular debt in the gas sector.
  

ISLAMABAD: In its bid to tackle the issue of rising cyclical debt, the federal government is working on practical proposals, including increasing oil levy on petrol (Mogas) and diesel from Rs 60 to Rs 80 per litre. The news reported on Sunday.

Top authorities are also considering imposing another oil levy and raising natural gas duties on top of gas companies’ revenue requirements to allow the government to tackle a cyclical debt that has ballooned to 2.9 trillion In the gas sector Rs.

The government also aims to keep the amount of gas infrastructure development cess (GIDC) held by the Finance Department.

In addition, officials are also looking at the option of settling some amount to offload intra-corporate debt in cash, while the rest will be met through book adjustments, as was done in 2013 by then finance minister Ishaq Dar, ending the debt circular in the sector. of electricity through payments of Rs 480 billion to Independent Power Producers (IPPs).

The government asked the Petroleum Directorate to come up with practical proposals to address the issue of cyclical debt after the Finance Ministry, following International Monetary Fund (IMF) directives, refused to release a fiscal grant for FY25 to end the loss of 260 billion Rs. in the wake of non-recovery of RLNG diversion to domestic consumers — a fact also communicated by the Finance Directorate.

Officials said the revenue collected through oil levy is used by the Finance Department to finance the fiscal deficit. If the levy is increased by Rs 20 per litre, it can be used for the same purpose.

The government should pass another act in the National Assembly for a special levy to be used to retire the circular debt in the natural gas sector, they added.

Moreover, an official also said that the government will have to introduce changes in the GIDC Act if it wants to use the GIDC amount to tackle the circular debt.

The government has so far collected Rs 350 billion from various companies under GIDC and the remaining Rs 400 billion is yet to be recovered from the fertilizer and Compressed Natural Gas (CNG) sectors, he added.

However, the option to increase the gas tariff by more than the required revenue requirements of the gas companies every six months will ensure surpluses that can be used to reduce the cyclical debt in an incremental manner. But for this, the political will of the regime, which is a cathedral, is required.

The relevant officials of the Petroleum Directorate have also proposed to maintain the sale price of natural gas from July 1, 2024, against the 10% reduction in the system gas price proposed by Ogra, so that the deficit of previous years which reached Rs 1,500 billion be able to be reduced by Rs 100 billion in a phased manner.

The government may also maintain gas prices for the fertilizer sector but will increase the gas price for captive power plants to Rs2,900 or Rs3,000 per MMBTU from the existing price of Rs2,750 per MMBTU under IMF check.