Petrol levy rate may increase to Rs 60 per litre
Islamabad: In a move that could further fuel inflation, the government is considering increasing the petrol levy rates to a record Rs 60 per litre on petrol products. This increase is part of the government’s plan to generate approximately Rs 2.9 trillion in non-tax revenues in the next financial year.
The proposal aims to create additional fiscal space for spending, as the government expects a 30% increase in expenditure on pension payments and the functioning of the civil government compared to the original budget for this year.
Sources have informed that the Ministry of Finance has proposed raising the levy rate by an additional Rs 10 per litre to collect around Rs 870 billion from this source during the fiscal year 2023-24. The current rate stands at Rs 50 per litre.
Despite the anticipation of a rise in crude petrol oil prices to $100 per barrel by the end of the year due to Saudi Arabia’s production cuts of petrol 100,000 barrels per day, the Ministry of Finance has put forth the proposal to increase the rates.
Petrol Price:
The projected petrol prices for the next fiscal year will remain high, with the central bank estimating an average exchange rate of Rs 308 per dollar.
In the current fiscal year, the government had set a target of collecting Rs 855 billion through the petrol levy. However, during the first nine months of this fiscal year, the collection only reached Rs 362 billion.
Another significant source of non-tax revenue is the profits of the State Bank of Pakistan (SBP).
Sources reveal that the finance ministry now estimates the income under this category to be Rs 1.1 trillion, compared to the earlier estimate of Rs 920 billion.
Non-tax revenues are not shared with the provinces, and the federal government is increasingly relying on these sources to fund its expenditures.
Govt Text revenues:
The government may also explore other sources, such as wealth tax and windfall levy on banks, to achieve the target of collecting Rs 2.9 trillion in non-tax revenues for the next fiscal year, said the sources.
For the current fiscal year, the government aimed to generate Rs 1.9 trillion in non-tax revenues.
The government faces challenges in finding innovative ways to increase tax collection, as internal politics hinder the implementation of recommendations from the Reform and Revenue Mobilisation Commission (RRMC).
According to the RRMC report, implementing five measures could generate an additional Rs 635 billion in revenues during the next fiscal year.
One of the recommended measures is ending the final tax regime for exporters, which could generate Rs 300 billion in annual revenues for the Federal Board of Revenue (FBR).
Currently, exporters are taxed under the Final Tax Regime and are exempt from FBR audits. The RRMC proposes bringing exporters under the normal tax regime by placing them under the Minimum Tax Regime.
RRMC tax:
The RRMC report also suggests that increasing the income tax rate for the non-corporate sector could generate an additional Rs 150 billion in revenues.
Curbing expenditures remains a major challenge for the government.
The estimated pension expenditure for the next fiscal year is Rs 780 billion, reflecting an increase of Rs 172 billion or 28% compared to the original budget of this year.
Additionally, the cost of running the civil government is projected to be Rs 720 billion, up by Rs 167 billion or 30%.
Sources indicate that they estimate the budget deficit for fiscal year 2023-24, which is the gap between expenses and income, to be around 7.4% of the GDP, equivalent to approximately Rs 7.8 trillion in rupees.
The government has made slight changes to its earlier projected budget figures.
The overall primary budget might show a slight positive balance due to provincial cash surpluses. The overall budget deficit could be around 6.8% of the GDP or approximately Rs 7.2 trillion.
Published in The Logical Baat, June 8th, 2023.
