ISLAMABAD  -    The ECC on Friday proposed to increase the prices of oil products by up to Rs9.53 per litre for ongoing month, which would fuel the inflation rate in the country.

The Economic Coordination Committee (ECC) of the Cabinet has recommended enhancing prices of the petroleum products for current month.

Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh chaired the meeting of the ECC. The federal Cabinet in its last meeting referred the matter of increasing oil prices to ECC, which would send its recommendations to a special committee. Prime Minister Imran Khan would rectify the decision of the ECC.

The government has not increased the petrol prices as recommended by the Oil and Gas Regulatory Authority. OGRA has proposed to increase the petrol price by Rs14.37 per litre (12.68 percent). However, the ECC has recommended enhancing the price by Rs9.53 per litre. The reduction will entail a revenue loss of around Rs5 billion to the government. The new price of petrol would touch Rs108.42 per litre from Rs98.89 per litre. The government has decided to reduce the GST on petrol by five percent to provide relief to the consumers.

The ECC has recommended an increase of Rs4.89 per litre (4.16 percent) in the price of High Speed Diesel (HSD). HSD price would increase from the existing 117.43 per litre to Rs122.32 per litre. Meanwhile, it has also suggested increasing the kerosene oil price by Rs7.46 per litre (8.35 percent) and Rs6.40 per litre (7.95 percent) in Light Diesel Oil. Kerosene oil price would increase from 89.31 per litre to Rs96.77 per litre and LDO from Rs 80.54 per litre to Rs86.94 per litre.

The decision of increasing oil prices would impact the inflation rate, which is already on the higher side. The inflation rate has recorded at 8.8 percent in April after touching five years highest level of 9.41 percent last month (March).

“Inflation rate will touch the double digit in next few months due to the impact of the higher oil prices,” said an economist who is part of the government’s Economic Advisory Council. He further said the government has increased the prices of oil products to avoid further shortfall in tax collection. The government would either have to increase the prices or maintain by reducing the taxes on petroleum products prices.

The Federal Board of Revenue (FBR) is struggling to achieve the tax collection target as the revenue collection shortfall increased to Rs345 billion. The FBR has collected Rs2.995 trillion in taxes as against Rs3.35 trillion ten-month target, showing shortfall of Rs345 billion. The FBR is unlikely to achieve the annual target of Rs4398 billion by the end of current financial year.

Apart from the General Sales Tax (GST), the PTI-led government had already enhanced petroleum levy from January 2019 to generate more revenues. Earlier the petroleum levy on HSD was Rs8 per litre and on petrol Rs10 per litre but from January 1st the government has enhanced the Levy. Since February 1st, the consumers are paying Rs22 per litre PL on HSD, Rs18 per litre on petrol (motor gasoline), Rs6 on kerosene oil and Rs3 on LDO.

The ECC approved the proposal of Petroleum Division to allocate gas from Thal East, Bhambhra and Thal West Fields to M/s SSGCL. Industries Division updated the ECC on Ramazan Relief Package and informed that Utility Stores across the country were being stocked to cater for the Ramazan shopping.

The Committee also approved Supplementary Grants and Technical Supplementary Grants for different ministries/divisions. It also approved payment of salaries to Khasadars of South Waziristan.