Hike in oil prices, power tariff to sabotage PM vision of lowering input cost

FPCCI President Anjum Nisar says move to affect present declining trend in inflation.

The country’s apex trade body on Saturday, opposing the jump in prices of petroleum products by a significant margin for the rest of Dec 2020, stated that the move would sabotage the Prime Minister’s vision of lowering input cost.

FPCCI President Mian Anjum Nisar, while talking to a trade a delegation here at his office, said that the regular attempt of economic managers to increase oil prices along with hike in power and gas tariffs will ultimately harm the government’s overall move of reducing production cost in the country announced by the PM in various phases, including Industrial Power Tariff for SMEs and reduction in markup rate to 7 percent by the SBP.

“It is the fact Brent price in the international market has crossed $50 per barrel but the government can compensate the industrial and general consumers by slashing the levies and taxes ratio on oil, as the government has yet been charging very high petroleum levy and the GST on petroleum products,” he argued.

The FPCCI President said that at a time when country’s GDP ratio was further stretched owing to nominal exports growth mainly due to high cost of doing business, the businesses need maximum relief. He said that Pakistan’s economy is going through a challenging time due to the second outbreak of Covid-19 pandemic. With a view to improve the cash flow of businesses at this crisis like situation, the authorities would have to support the economy through decline in taxes ratio on all items including the POL products.

Comparing the current world oil prices with the local rates when present government came to power in Aug 2018, he said that Brent oil price in the international market was $72 per barrel and now it is around $50 a barrel, showing a cut of around 22 dollars. In August 2018, the local market price of diesel was Rs112 per litre, petrol Rs95 and kerosene Rs83 per liter. Now, when the Brent price is $50 per barrel, petrol is over Rs103 per liter and diesel almost Rs108 per liter, which clearly indicates that the benefit of oil prices’ reduction were never passed on to the consumers over the whole period.

“It is appreciable that in revising the prices of petroleum products, the government did not pass on the full impact of increase in international prices yet the move would affect the present declining trend in the rate of inflation.”

“The FPCCI welcomes the positive step of the government to reduce petroleum levy on petrol by about Rs4 per litre to Rs24 from record high level of almost Rs28 and about Rs2 per litre reduction in levy on HSD,” he said. “But we think that there is still great cushion to cut this levy further as the government is still charging a standard rate of 17% general sales tax across the board to generate additional revenues while petroleum levy is slightly lower than maximum permissible limit,” he added.

The authorities should keep in mind that the government was charging just 0.5% GST on LDO, 2% on kerosene, 8% on petrol and 13% on HSD until Jan 2019, but now it is charging a total of about Rs42 per litre tax on petrol and about Rs59 per litre on HSD even after announcing a little cut in taxes, he added.

Mian Anjum Nisar said that the government, for the long time, has been charging high levy on petroleum products to minimize its revenue losses instead of letting consumers benefit fully from the reduction in global oil prices during pandemic-hit economic slowdown. He said that by jacking up the ratio of taxes, duties and PLs, the government had deprived the consumers of relief from the plunge in global oil prices which is totally unjust. He suggested that business-friendly policies must be adopted as other neighboring countries of the region are giving to trade and industry. He said that sizeable cut in oil rates would certainly bring down the cost of doing business and our products would get their due share in the global market.

The FPCCI president called upon the government to address the key issues of trade and industry, facilitate the economic growth along with improving tax revenue of the government. He said that the impact of COVID-19 has badly affected business and industrial sector, stressing the government to bring down GST in order to ease the difficulties of businesses.

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