ECC hikes petroleum levy on 'luxury vehicle fuel' to bridge revenue shortfalls.

ISLAMABAD -- As the country's fiscal deficit surged by 43 per cent in the first quarter of the current fiscal year, the government on Friday decided to increase Petroleum Development Levy (PDL) by about 67pc (Rs20 per litre) on top quality petrol used in luxury vehicles.

The decision to increase PDL on Research Octane Number (RON) 95 and 97, commonly known as high-octane blending component (HOBC), was taken at the meeting of the Economic Coordination Committee (ECC) of the Cabinet which also allowed up to $15 per barrel premium on high-speed diesel to private oil marketing companies for two months - November and December - involving an additional impact of about Rs10 per litre.

The meeting presided over by Finance Minister Ishaq Dar also approved a technical supplementary grant of Rs5bn to conduct the 7th population census through digital means.

The decisions came after the Ministry of Finance reported its first quarter fiscal deficit at 1pc of GDP against 0.7pc of GDP for the same period last year. The deficit in absolute numbers in July-September was reported at Rs809bn compared to Rs484bn in the same period last year, an increase of 67pc.

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The increase in PDL by Rs20 per litre on HOBC 95Ron and 97Ron was approved by the ECC instead of the imposition of 17pc general sales tax to generate about Rs6bn additional revenue demanded by the Federal Board of Revenue that suffered about Rs25bn shortfall against its October target and wanted to make up for the loss going forward.

Mr Dar approved an increase in PDL because 17pc GST would have increased the product price by almost Rs40 per litre and yet about Rs24 per litre would have gone to provinces and about Rs16 to the centre. As a result, the centre would now get Rs20 per litre or almost Rs8bn in non-tax revenue - solely a federal revenue stream.

The FBR told the ECC that the government had signed an agreement with IMF to 'trigger contingency measures to keep the revenue collection on target'. It said the HOBC products were luxury goods being consumed by wealthy people in luxury vehicles. 'Therefore, the ECC after deliberation allowed to increase petroleum levy from Rs30 up to Rs50 per litre on RON 95 and above with effect from Nov 16,' an announcement said.

The Ministry of Energy (Petroleum Division) told the ECC that petroleum pricing was based on the premium Pakistan...