The News reported that just on the eve of petroleum products prices revision, the Ministry of Finance has asked the government not to pass on the impact of a decline in international oil prices to the consumers.

The petroleum prices are set to be revised downwards for the month of June, in line with the declining trend in international markets. Official sources said that the Finance Ministry has approached the government to maintain prices with the aim to shore up money at the time of acute financial crunch. Because of an unending appetite for money to bridge fiscal deficit, the government has build up a stockpile of overdrafts payable to the central bank and commercial banks.

They said that once the proposal gets implemented, the petroleum prices from June 1 will stay at the current levels and the difference adjusted in the shape of petroleum levy. Based on the 9 month average consumption figures compiled by the Oil Companies Advisory Committee, the government will add around PKR 4 billion to the national exchequer by maintaining petroleum prices at May level.

The Oil and Gas Regulatory Authority, which calculates fuel prices in the country, sent a summary to the prime minister, proposing decline of Rs6 a litre in the price of diesel, PKR 1.5 in petrol and PKR 2 in the price of kerosene oil. However, the proposed decline is not exactly in line with international oil price movements given the depreciation in the value of rupee.

According to the government’s analysis, global oil prices declined between 1.5% and 6% under various subcategories over the past month, however the rupee lost approximately 0.7% against the US dollar. A significant proportion of domestic fuel prices are taxed under the petroleum levy, one of the main sources of the government to raise revenue. Only kerosene oil and light diesel oil are exempt from taxation.

The government projects to collect around PKR 110 billion in taxes on petroleum products in the next fiscal year. This fiscal year ending June 30th 2011, the government did a poor show by colleting PKR 60 billion only in fuel taxes. Due to the political pressure, the government did not pass on the impact of rising oil prices and on three occasions this year it kept the rates unchanged. The move had a positive impact on the rising inflation, but it deprived the cash starved government of much needed revenue.

(Sourced from www.thenews.com.pk)