During the first half of fiscal year 2020 the government is expected to raise 43.7% higher revenues from key oil & gas products as compared to the corresponding period last year. This performance is even when the domestic production has fallen by 10% and imports have fallen by 20%. Finance ministry has released the data about the total revenue collection on Sunday. It showed that the total revenue collections earned from 7 important oil & gas products is Rs. 250 billion in first half (July – December 2019). Revenue earned in the corresponding period last year was Rs. 151 billion and hence it has increased by 35%. Another collection of Rs. 160 billion has been raised from General Sales Tax (GST) on oil products. Figure for the corresponding period last year had been Rs. 103 billion and hence it has increased by over 55%.
Rise in Tax rates, eradication of legal issues and higher international prices of petroleum products helped in increasing the revenue
Since the total revenue from these 8 heads has amounted Rs. 365 billion in July – December 2019 as against Rs. 254 billon during July – December 2018, this has been increased by about 43.7%. Oil and gas sector has hence been proved to be the single largest contributor of country’s revenues. Three major factors which have been identified to contribute towards the increase in revenues of petroleum sectors include substantial rise in tax rates, legal challenges removals as well as higher international prices. These revenue estimates do not include revenues from collections of provincial taxes through oil and gas and the taxes on the value addition to oil products. Revenue from sale of LNG and natural gas to the consumers has also not been included.
It is reported that the production of domestic petroleum products has been dropped by 10 percent
The data from finance ministry shows that the petroleum levy collection on different oil products has increased by almost 69% higher during the first half of current fiscal year as compared to the corresponding period last year i.e. Rs. 138 billion current year and Rs. 82 billion last year. Similarly the surcharge on development of natural gas has increased by 51% i.e. Rs. 4.6 billion in the first half this year as compared to Rs. 3.037 billion last year.
However the collection of gas infrastructure development cess (GIDC) has been reduced to Rs. 5.03 billion this year as compared to Rs. 11.45 billion last year due to reduction in the cess by the government.
During the first 6 months royalty on oil and gas has been amounted to Rs. 44 billion as compared to Rs. 41.8 billion in the corresponding period last year hence showing an increase of 5.3%. Discount retained oil and gas have provided Rs. 7.2 billion to the treasury as compared to Rs. 6.5 billion in the corresponding period last year hence attaining an increase of 11%.
According to data provided by Pakistan Bureau of Statistics (PBS) these progresses have been shown although production of petroleum products in the first half of the current year (July – Dec 2019) has dropped by 10.33% i.e. 6.8 billion litres against 7.6bn litres in the corresponding period last year. The bureau reported reduction of 9% and 10% respectively in the production of two major projects — petrol and high speed diesel as a sign of slower economic activities prevailing in the country.
PBS has also reported about 20% reductions in oil imports during the first half of the fiscal year (July – December 2019) in $ terms and about 2.75% decrease in PKR. The total bill for oil import has dropped to $6.14bn in July-Dec 19 from $7.66bn in July-Dec 2018.
The import value of petroleum products has dropped to $2.59bn from $3.4bn during the said period, showing a drop of 24%. The value of crude imports have also decreased by 27% i.e. from $2.43 billion to $1.77 billion. A fall of 13% and 14% respectively has been noted in the imports of petroleum products and crude oil during the period under review.
GST on all petroleum products have been increased to standard rate of 17% across the board for generating additional revenues by the government. Until January last year the tax rates have been 0.5% GST on LDO, 2% on kerosene, 8% on petrol and 13% on HSD.
Petrol levy on HSD has also been increased by more than double in recent month i.e. Rs. 18 per litre from Rs. 8 per litre. Similarly the levy on petrol has been increased by 50% i.e. Rs. 15 per litre as compared to Rs. 10 per litre. However levy on kerosene oil & LDO remains unchanged i.e. Rs. 6 and Rs. 3 per litre, respectively.
Motive to increase in rates of petroleum levy is to overcome the major revenue shortfall being faced by FBR. The levy remains in the revenues of Federal government as compared to GST out of which 57% share is taken by the provinces.
The petrol and HSD are 2 major products generating major revenues for the government due to their growing consumption in the country. Total HSD sales are almost 700,000 tonnes per month and the petrol consumption within the country is 600,000 tonnes.