ECC approves Rs20 PDL on HOBC

ISLAMABAD: While rejecting the summary to slap 17 percent GST on petroleum products, the Economic Coordination Committee (ECC) of the Cabinet jacked up the petroleum development levy by Rs20 per litre, increasing it from Rs30 to Rs50 per litre on High Octane Blending Component (HOBC)/RON95.

The ECC also increased the premium on diesel from $8.5 to $15 per barrel for Oil Marketing Companies (OMCs). It will cause an effect of Rs10 per litre on the price of domestic consumers.

The ECC also approved Rs5 billion for conductingthe upcoming 7th Population Census during the current financial year. “It’s symbolic that the government increased the Petroleum Levy on high net worth consumers of HOBC,” Minister for Finance Ishaq Dar told a select group of reporters on Friday night. He said the government did not slap 17 percent GST as it would have caused more than Rs35 per litre increase in prices. Instead, the ECC approved an increase in the petroleum levy from Rs30 to Rs50 per litre with effect from November 16, 2022.

The ECC was informed by the FBR high-ups that in order to shield the general public from the inflationary impact of an across-the-board increase in GST on all POL products, the sales tax rate may be enhanced from 0% to 17% on High Octane Blending Component (HOBC) and RON 97 only. The HOBC and RON 97 petrol is a luxury good being consumed by wealthy consumers in expensive vehicles. It is being sold now at a premium price of Rs256 per litre in contrast to Super Petrol, which is being sold at Rs225 per litre. The revenue impact of this proposal for the remaining part of the current financial year (8 months) is estimated at Rs6 billion. The finance minister after detailed deliberations rejected the FBR summary; instead the ECC granted approval for jacking up Petroleum Development Levy from Rs30 to Rs50 per litre.

According to the official statement issued by the Ministry of Finance, Federal Minister for Finance and Revenue Senator Ishaq Dar presided over the meeting of the Economic Coordination Committee (ECC) at the Finance Division on Friday. Federal Minister of Planning, Development & Special Initiatives Ahsan Iqbal, Federal Minister for Power Khurram Dastgir Khan, Shahid Khaqan Abbasi MNA/ex-PM, Minister of State for Finance and Revenue Dr. Aisha Ghous Pasha, Minister of State for Petroleum Musadik Masood Malik, SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Pasha, federal secretaries, chairman FBR and other senior officers attended the meeting.

The Ministry of Energy (Petroleum Division) submitted a summary on High-Speed Diesel/ Gas oil premium and informed that due to difference of premium on import of HSD for importing OMCs and PSO, there is an unsustainable position for importing OMCs and smooth supply of HSD in the country. In order to ensure sustained supply/import security, the ECC after detailed discussion allowed a premium on HSD subject to maximum capping at US$15/BBL for importing OMCs other than PSO for the months of November and December 2022.

The Federal Board of Revenue presented a summary on increase in the rate of Sales Tax on HOBC. It was conveyed that the rates of Sales Tax on POL products were reduced to zero from 1st February 2022, which put pressure on FBR’s efforts to achieve its revenue targets. Therefore, the ECC after deliberation allowed to increase the petroleum levy from Rs30 up to Rs 50/liter on RON 95 and above with effect from 16th November 2022, which is a luxury good being consumed by wealthy consumers with expensive vehicles. The ECC also approved Technical Supplementary Grants of Rs5 billion for the conduct of the 7th population census.