How Petroleum prices are raised - Mind Blowing

The government, oil marketing companies (OMCs) and dealers are making billions of rupees by charging Rs14.94 on one litre petrol, Rs25.03 on HOBC, Rs9.84 on kerosene oil and Rs8.5 on one litre diesel, discloses detailed notification about raise in POL products effective March 1.

It is shockingly interesting for masses to note that the import parity price of petrol stands at Rs43.75 per litre, which is being sold to end consumers at Rs58.70 per litre with windfall profit of Rs14.94 per litre to the national kitty.

Similarly the landed cost of HOBC (high octane blending component) stands at Rs44.85 per litre, kerosene oil Rs28.89 and light diesel oil Rs27.63 per litre which are being sold at Rs69.88 per litre, Rs38.73 and Rs36.07 per liter respectively, showing that the government, OMCs and dealers are minting Rs25.03 per litre, Rs9.84 and Rs8.5 on one litre in the heads of taxation, distribution margin and dealers commission.

This pricing formula is so controversial that if revisited, the prices could be reduced to a reasonable extent. "Since the taxation on import of POL products is easiest mode to collect revenue, the government has increased the volume of tax to cover up the impending deficit in revenue, which the government is expecting because of the three day economic activities standstill triggered by December 27 tragedy in which Mohtarma Benzair Bhutto was assassinated."

With the increase in POL prices from March 1, the government has increased the general sales tax (GST) on petrol by 9.4 percent (66 paisa per litre) to Rs7.66 from Rs7.00 per litre; on HOBC by 7.6 percent (65 paisas per litre) to Rs9.11 from Rs8.48 per litre; on kerosene oil by 9.7 percent (45 paisa per litre) to Rs5.05 from Rs4.60 per litre and on diesel by 10.5% (45 pasia per litre) to Rs4.70 from Rs4.25 per litre.

The outgoing regime also increased the petroleum development levy (PDL) on petrol by 57 percent to 57 paisas from zero PDL. Likewise it has raised PDL by Rs4.3 percent on one litre of HOBC to Rs6.26 from Rs5.99 per litre.

In the newly notified POL products prices, the government increased the distribution margin of oil marketing companies on petrol by 12 paisa per litre to Rs1.64 from Rs1.52, on HOBC by 13 paisa to Rs1.77 from Rs1.64 per litre, on kerosene oil by 10 paisa per litre to Rs1.14 from Rs1.04 per litre and on diesel by 10 paisa to Rs1.06 from 0.96 per litre.

The government also increased dealers' commission on petrol by 4 paisa per litre to Rs1.88 from Rs1.74 and on HOBC by 15 paisas per litre to Rs 2.03 from Rs1.88 per litre. In the notified prices, rate of inland freight equalisation margin also increased on petrol by 82 paisas per litre to Rs3.10 from Rs2.28 per litre, on HOBC up by Rs1.50 to Rs5.86 from Rs4.36 pr litre, on kerosene oil swelled by 90 pasia per litre to Rs3.65 from Rs2.71 per litre, jacked up by 25 paisas to Rs2.74 from Rs2.47 per litre.

COURTESY : THE NEWS on
Tuesday, March 04, 2008
By Khalid Mustafa