Petroleum Levy collection on the rise

ISLAMABAD   –  Apart from collecting other taxes, the government’s collection from Petroleum Levy is continuously increasing from last few years, helping in meeting the country’s expenditures.

The government had collected mammoth Rs954.3 billion as Petroleum Levy (PL) in last three and a half years. As like other taxes, the federal government has not made Petroleum Levy as a part of the divisible pool under the National Finance Commission (NFC) Award, therefore it could not be shared with the provinces. “Collection of Petroleum Levy being part of Federal Consolidated Fund, in terms of Article 78(1) of the constitution of Pakistan, is utilised to meet federal government’s budgetary requirements,” the ministry of finance said in official documents. The Petroleum Levy is collected as non-tax collection, which only the federal government could spend. 

The documents showed that federal government had collected Rs179 billion as Petroleum Levy in fiscal year 2017-18, Rs206 billion in 2018-19 and Rs294 billion in last fiscal year. Meanwhile, the Petroleum Levy had shown massive increase in the first half (July to December) of the ongoing fiscal year. The government has collected Rs275.3 billion as petroleum levy in first half of the year 2020-21 as compared to Rs136.4 billion collected in the corresponding period of last year. The government would have to collect further Rs175 billion as Petroleum Levy in second half (January to June) of the ongoing financial year to meet the annual target. The budgeted target of Rs450 billion generated through Petroleum Levy in current financial year is 73 percent higher than last financial year’s revised target of Rs260 billion.

Massive increase in petroleum levy collection has helped in increasing the government’s non tax collection during first half (July to December) of the current fiscal year. The government’s non tax collection has shown massive increase of 151 percent in July to December period of the year 2020-21. Non tax collection was recorded at Rs895.3 billion in first half of the ongoing financial year as compared to Rs356.3 billion in the same period of the previous year, according to the latest data of the ministry of finance.

The economic experts believed that the government has adopted this course of path for increasing non tax revenues because it does not become part of federal divisible pool (FDP) under National Finance Commission (NFC) and the provinces do not have any share in this revenue stream. If the government had decided to rise GST on POL products then it had become part of FDP and the provinces would have lion’s share out of it in accordance with resource distribution formula under the NFC arrangement.

The government was charging high Petroleum Levy in ongoing financial year. However, the government had not recently increased the oil prices amid political challenges by cutting the Levy. The government had reduced the Levy by Rs8.39 per litre of petrol to Rs12.65 per litre. Similarly, it has cut the PL by Rs9.58 per litre price of High Speed Diesel (HSD) to Rs12.53 in last one month. The petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country.