The federal government has increased the sales tax on diesel to record high of 50 percent, depriving the people, especially growers of the benefit of falling prices in the international markets.

According to energy experts, the government is presently charging tax of around Rs18 to 34 per liter on various petroleum products, as the import price of petrol is Rs39.94 per liter while the price in the market is Rs73.76 per liter. Similarly, diesel’s import price is Rs40.54 and government has fixed its rate at Rs84.04 per liter. In the same way, kerosene’s import price is Rs38.43 but government is charging the price at Rs57.14 per liter.

“The unprecedented levy on diesel would discourage the use of 80 per cent tube wells for upcoming crops which will indirectly hit major industrial sectors of the country,” experts said.

According to them, the FBR revenues are falling short of the target due to the continuous decline in oil prices, inefficiencies of the tax machinery, politically motivated tax concessions and lax enforcement of the existing laws and imposition of taxes on oil prices is easy way to grab the money of public.

The International Monetary Fund (IMF) has also asked Pakistan to take additional steps to mitigate the impact of the steep decline in tax collection by the FBR. As against the standard sales tax rate of 17pc, the government has set the GST rate of up to 50pc on petrol, HOBC, light diesel oil, high speed diesel oil and kerosene, which is the fuel of the poor and used in a large quantity in rural areas of the country.

The Federal Board of Revenue (FBR) has increased sales tax from 25.5 percent to 26 percent on Motor spirit, 45 percent to 50 percent on High speed diesel and 20 percent sales tax is being collected on import and supply of furnace oil from October 1, 2015, states SRO.962(I)/2015 and SRO.963(I)/2015.

Rice Exporters Association of Pakistan chairman Shafique Ch said that 50 percent GST on diesel would put an additional financial burden on the country’s agricultural sector, which is using 3.5 billion litre diesel annually.

Shafique Ch said that some 800,000 tractors and 8,50,000 tube-wells besides a large number of harvesters and other mechanical tools are being used in agricultural sector. Especially when there is no canal water availability, dependence on diesel to run tube-wells have also increased, he added. He said that it is irony that the prices of diesel had been increased at a time when its rates are constantly declining all over the world.

“Water contributes more than 50 percent cost of agriculture produce particularly the rice and 50 percent sales tax on diesel means the major cost of farmers production has been increased significantly,” he added.

The REAP Chairman stressed the need for early implementation of the PM’s solar tubewell plan, as it can provide long-term relief to farmers if it is implemented properly. The proposed plan will lower input cost of farmers, equalizing exporters cost to the regional competitors, helping improve rice export.

The solar tubewells will also save electricity which can be diverted to the industry in future, he added. He said that diesel should be provided to agricultural sector at subsidized rates as being provided in India. He said that the small farmers have been left with no other option but stay away from cultivation, as they are unable to purchase diesel to irrigate their fields.

According to the agriculturists, sufficient availability of water is a must to sustain rice crop, which seemed unlikely, as the farmers are unable to purchase diesel to irrigate their fields under present circumstances.

IEP Lahore Centre chairman Engineer Khalid Sajjad observed that the real benefit of cut in petroleum rates could not be passed on to general public and it seemed that transporters as well as other trade mafias are so strong that provincial governments could not force them to make necessary reduction in prices.

The reduction of total 25 per cent in petroleum prices is still not a reflection of the huge drop of around 50 per cent oil price in the international market, stated Khalid Sajjad.

Khalid Sajjad asked the government to announce a further reduction of at least 20 per cent, besides withdrawing unjustified taxes, to make it in line with the international prices. The government should also announce cut in power tariff in line with reduction in oil prices as around 70 per cent of electricity is generated through oil.

The permanent solution of controlling inflation is to erect big dams with a view to generate cheaper electricity through hydel ways, besides saving billions of rupees import bill of oil, he maintained.

LCCI former vice president Kashif Anwar said that for our economic managers this is a great opportunity as lower oil bill will give them a much-needed sigh of relief as falling oil prices ease pressure on balance of payment position.

Kashif demanded of the government to take steps for overcoming the power crisis due to unscheduled gas and power loadshedding as it has become impossible for the industrialists to meet the export targets. He urged the government to take measures for improving the law and order, which was adversely affecting the national economy.

FPCCI President Mian Adrees said that reduction in petroleum prices would provide relief to the industry. He said survival of a country only depended on sound economy, which needed peaceful atmosphere, better law and order and business friendly environment.

FBR Member Inland Revenue (Policy) Shahid Hussain Asad said the FBR issued SRO 962(I)/2015 to increase the sales tax rate of furnace oil to 20 percent from 17 percent effective from October 1, 2015. He said the move would increase the electricity prices in the country. He said the decision was taken considering the shortfall in the revenue during the first quarter of the current fiscal year 2015/16. The three percent hike in GST on furnace oil might generate additional revenue of about Rs3.5 billion in one month.

According to energy experts, increase in sales tax on furnace oil will deprive the consumer cheap electricity, as most of the IPPs in the country run on furnace oil and high speed diesel and 60 percent electricity generated is based on oil.