Having pocketed a record Rs136 billion in lieu of Petroleum Levy during 1QFY21, the government is well on course to rake in even higher number for 2QFY21. In all likelihood, a new quarterly Petroleum Levy record is all put in the bag – where it could likely cross Rs150 billion.
Lower international crude oil prices have helped no doubt. Arab light crude for the reference period between July to December has averaged a lowly $44.8 per barrel – in stark contrast to $70/bbl in the 1H of FY20. The Petroleum Levy on gasoline in 1HFY20 stayed at half the maximum allowed limit at Rs15/ltr. That in 1HFY21 has averaged Rs28/PL, very close to the maximum allowed limit of Rs330/ltr.
All this while, the average gasoline retail price has remained lower by 15 percent or Rs15/ltr – despite record high tax incidence on gasoline. Stars have really aligned well when it comes to petroleum pricing this year for the government.
Similarly, HSD prices have also averaged 19 percent lower year-on-year during Jul-Dec 2020 at Rs103/ltr. The opportunity was there for the taking to increase the PL without having to worry about inflation, as the PL per liter on HSD climbed from an average of Rs18/ltr in 1HFY20 to Rs28/ltr in 1HFY21. Add to that, 9 percent incremental consumption for Jul-Nov at 8 billion liters – and you have a perfect recipe to achieve what was at one point, a seemingly impossible PL collection target of Rs450 billion.
With only the mid December retail prices to be announced to complete the 1HFY21 – it is highly likely the PL collection will have reached Rs290 billion. For better context, an almost identical Rs294 billion were collected in the full year FY20.
If the demand keeps pace and the oil prices rise with the Covid vaccine news, there is still nothing to worry on the PL front. Nearly two-third of the annual collection target has been achieved in just six months. Even reducing the PL by Rs10/ltr from the current maximum limits to Rs20/ltr for the second half of FY21 – will yield an annual PL in excess of Rs460 billion. This sure is one worry less for Islamabad, as far as fiscal and inflation fears are concerned.
