Govt trades cheaper petrol for power relief
Prime Minister Shehbaz Sharif on Saturday raised the petroleum levy by Rs10 per litre – a 17% hike – to Rs70 per litre, keeping petrol and diesel prices unchanged, while using the available additional fiscal space to reduce electricity prices by roughly Rs1.50 per unit.
Despite the increase, the ex-depot petrol price will remain at Rs255.63 per litre, while high-speed diesel will stay at Rs258.64 per litre, according to officials from the finance and energy ministries.
The government opted not to pass on the reduction in global oil prices to consumers, which was due on March 16. The total reduction in electricity prices is expected to be more than Rs1.50 per unit, with the prime minister planning to announce the relief on March 23.
On the summary of the finance ministry, the prime minister approved to increase the petroleum levy rates by Rs10 per litre to Rs70. The additional Rs10 per litre will be used to reduce the electricity prices by about Rs1.50 per unit.
"We have decided to maintain petroleum prices at their current levels and transfer the full financial benefit to the public by reducing electricity prices," the prime minister said.
The premier added that this measure is one of many aimed at achieving a meaningful reduction in electricity tariffs. "This step is among several others that will lead to a significant reduction in electricity prices."
The residential consumers are forced to pay over Rs65 per unit electricity price which is the direct outcome of Rs18 per unit idle capacity payments, hefty cross subsidy being charged from users of over 300 monthly consumption and building the cost of inefficiency and theft in the power rates.
The PM has tasked his power minister Sardar Awais Leghari to come up with a tangible proposal to reduce the prices in the range of Rs6 to Rs7 per unit.
The trade-off between petrol and electricity prices is being done to address an issue of high electricity bills, which is hurting every household and the industry, said Federal Minister for Petroleum Ali Pervaiz Malik while talking to The Express Tribune.
Ali noted that while petrol in Pakistan was among the cheapest in the region, electricity was the most expensive, which the prime minister is trying to rebalance.
The Express Tribune reported on Saturday that the International Monetary Fund (IMF) had allowed Pakistan to increase petroleum levy to Rs70 per litre and use the funds to reduce power prices. The levy has been increased to absorb price reduction.
The prime minister said that a comprehensive and effective strategy is being prepared under which an electricity package is being developed to reduce electricity prices and the details are being finalised.
The government has estimated earning about Rs180 billion per annum from the additional levy, which it will use to reduce electricity prices by about Rs1.50 per unit.
The government officials said that the total reduction in the electricity prices will be higher than this after availing the fiscal space on account of negative fuel price adjustment claims of the previous months.
The government also tried to convince the IMF to lower the GST rate on electricity bills to reduce prices but the Fund did not agree.
According to a comparison by the government, at US dollar parity, the petrol price in Pakistan is 91 cents compared to 1.15 dollars in India, 1.26 dollars in Sri Lanka and 1.04 dollars in Bangladesh. However, a key reason behind the higher price in dollar terms in neighbouring countries is that their currencies are stronger relative to a weaker rupee.
Likewise, the diesel price in Pakistan in dollar terms is 92 cents while it is $1.03 in India, $1.12 in Sri Lanka and 86 cents in Bangladesh.
Pakistan's per capita income is also lower than its regional peers, which limits its citizens' ability to pay high prices for fuel and electricity.
Petrol is mainly used in private transport, small vehicles, rickshaws, and two-wheelers, and it directly affects the budget of the middle and lower middle classes. Most of the transport and agriculture sectors run on high-speed diesel.
After the fresh increase, the total taxes on the petrol have increased to about Rs86 per litre. The government will now charge Rs70 per litre petroleum levy besides 10% excise duty at the import stage.
The financial space created by changes in global oil prices and other measures will be used to provide significant relief to the public through reduced electricity costs, the prime minister stated.
He reiterated his government's commitment to prioritising public relief since taking office.
As per the decision of the government, the oil prices will remain the same up to the end of the current month.
The per litre price of petrol will remain at Rs255.63, high-speed diesel Rs258.64, kerosene oil Rs168.13 and light diesel oil at Rs153.34.
On the other hand, the work submitted to the petroleum division by the industry a few days back showed relief in the price of petroleum products up to Rs14.16 per litre in line with a reduction in global oil prices.
The work by the industry showed that ex-depot prices of petrol could drop by Rs14.16 per litre and the same for diesel was projected to drop by Rs8.70 per litre.
A cut of cut of Rs10.33 per litre was calculated in the price of kerosene oil while Light diesel oil could have to dropper by Rs. 7.12 per litre.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
Budget: Pakistan govt projects $19.9bn foreign assistance
ISLAMABAD: The government has budgeted foreign assistance of $19.922 billion at dollar rate of Rs290 — (Rs5.78 trillion) from external resources for 2025-26 compared to $19.393 billion budgeted for the outgoing fiscal year 2024-25. The foreign assistance includes $3.1 billion (Rs899 billion) borrowing from foreign commercial banks against $3.8 billion (Rs1.114 trillion) for 2024-25. The government has budgeted $410 million (Rs118.900 billion) from the International Monetary Fund (IMF). $400 million (Rs116 billion) has been budgeted from bonds compared to Rs295 billion which was later revised to zero. The government has budgeted $9 billion under the head of time deposits including $4 billion SAFE China deposit and $5 billion KSA time deposit. The government has budgeted $1 billion from SFD (oil facility), $1.923 billion from Asian Development Bank (ADB), $1.663 billion from IDA, $419.55 million from IBRD, $700 million from IsDB (short-term), $609 million from Naya Pakistan Certificates and $105.419 million from AIIB. Copyright Business Recorder, 2025
Express Tribune
3 hours ago
- Express Tribune
Anti-digital, pro-realty sector budget
Finance Minister Muhammad Aurangzeb on Tuesday unveiled a Rs17.6 trillion budget, which attempted to limit fiscal expansion but taxation measures were clearly self-contradictory that on one hand would promote cash economy and fossil fuels but discourage these too on the other. The government of Prime Minister Shehbaz Sharif also introduced new taxes on the digital economy, pensioners and clean energy. Some of these measures were contradictory to the stated policy to discourage the cash economy. However, the Finance Bill 2025-26, also gave incentives for clean energy by taxing the internal combustion engine cars and fossil fuels. Despite high poverty and high unemployment, the government proposed to drastically reduce import duties from raw materials to finished goods, which the industry feared would lead to de-industrialisation of Pakistan. The economy has been opened for the foreign competition by lowering protection available to local industries. The finance minister said that the maximum custom duty slab has been reduced to 15% while a five-year plan had been given to abolish additional and regulatory duties. The inaudible budget speech, which Aurangzeb, delivered in the midst of rowdy opposition, clearly lacked in giving any policy direction. While the Finance Division tried to meet the International Monetary Fund's (IMF) requirement to meet fiscal targets, the Federal Board of Revenue (FBR) was not able to come up with the clear taxation policy. The Finance Bill 2025-26 appeared to be the most confusing document that any government produced in years. It revolved around going after the economy of the youth and the 21st century business practices. The government has proposed 18% sales tax on import of solar panels but it imposed Rs2.5 per litre carbon levy on use of petrol, diesel and furnace oil, showing the lack of clarity on the part of the government. Likewise, it increased the tax on cash withdrawals from banks from 0.6% to 0.8% to discourage cash economy and generate more easy money but it also imposed a new tax on digital services platforms in the range of 0.25% to 5%. The government also increased sales tax on 850 cc cars of the middle class from 12.5% to 18%. A new tax has been introduced on pensioners where the monthly pension of Rs833,000 has been taxed at the rate of 5%. The FBR was once again lacking in determining the policy, whether the government wanted to promote digital economy or cash economy. FBR Chairman Rashid Langrial cancelled the media briefing on the Finance Bill 2025-26, which was tantamount to compromising transparency and the right of the people to know about the measures that impact their futures. In his budget speech, the finance minister surprisingly stated that the "rapid growth in the online business and digital market places was creating problems for traditional businesses, therefore, it is proposed that e-commerce platforms, couriers and logistic services should be taxed at the rate of 18%. A tax official told The Express Tribune that the FBR would earn Rs64 billion by taxing the digital economy. The Finance Bill 2025-26 showed that the economic managers preferred the 19th century economy by providing some relief on purchase of properties but taxed the digital platforms of the 21st century. It has also proposed to ban economic transactions of ineligible persons, which include ban on purchase of properties, cars and investment in securities by persons whose assets do not match these purchases. Through the Finance Bill, the government also amended a host of other non-tax laws besides introducing two new legislations, the Digital Presence Proceeds Act 2025 and the New Energy Vehicles Adoption Levy Act, 2025. There might be constitutional questions, whether the new laws can be introduced through the Finance Bill. The government has proposed a total of over Rs415 billion worth of tax measures in the budget, said the senior tax official. These include Rs292 billion worth of FBR-related measures, Rs111 billion additional earnings by imposing Rs2.5 per litre carbon levy on petrol, diesel and furnace oil and Rs9 billion worth levy on conventional cars. Finance Minister Aurangzeb said that the IMF had also accepted the Rs389 billion worth enforcement measures. But he admitted that the FBR's tax-to-GDP ratio would remain below the IMF target of 10.6% in this fiscal year. The government has proposed these measures to extract a minimum Rs2.2 trillion from the sluggish economy in a bid to achieve next fiscal year's Rs14.13 trillion tax target. The petroleum and carbon levy target has been set at Rs1.47 trillion for the next fiscal year on the back of Rs80 per litre levy. The finance minister also announced some respite for the lower to middle income group salaried persons. He said that on the annual income of Rs1.2 million, the tax rate will be 2.5%, down from 5%. In the cabinet meeting earlier, there was an exchange of words between the finance minister and the Communication Minister Abdul Alaeem Khan, who had asked the prime minister to further increase the salaries for the government employees. On that the finance minister stated that this would require additional resources, prompting Khan to say that he was not a street vendor, who did not know that this required additional money, said a member of the cabinet on condition of anonymity. The prime minister decided that in order to give a 10% increase in the salaries, the tax rate for the lower middle income group should be increased from the proposed 1% to 2.5%, said the sources. On annual income of up to Rs2.2 million, the government has proposed to reduce the rate from 15% to 11%, on annual income of Rs3.2 million, the rate is reduced from 25% to 23%. There is no relief for the annual salaried income earners of over Rs4.1 million. However, the fine on highest income earners has been reduced from 10% to just 9%, which the finance minister called was necessary to stop "brain drain". Advance tax on sale or transfer of immovable property has been increased from 3% to 4.5% on the value of Rs50 million property. The rate is jacked up to 5% from 3% on Rs100 million property while it is further increased to 5.5% from 4%, if the value exceeds Rs100 million. However, on the purchase of the property the rate is reduced from 3% to 1.5%, from 3.5% to 2% and from 4% to 2.5%, depending upon the value of the property. The economic transactions by the ineligible persons have been banned, if the value of the new purchases is more than 130% of the value of the total assets. Tight fiscal path In order to stay in the IMF programme, the government has proposed a fiscally tight budget, although it created room for political spending too. The government has proposed a budget deficit of Rs6.5 trillion or 5% of the size of the economy. The total size of the budget is Rs17.6 trillion, which is 7.3% less than this year's original budget due to relatively lower allocations for the interest payments in fiscal year 2025-26. The proposed budget deficit is 1.8% of the GDP or Rs2.4 trillion less than the original estimates of this fiscal year. The deficit may still be appearing large in absolute terms. But it is, for the first time, lower than this year's gap, both in terms of size of the economy and in absolute numbers. The defence budget has been proposed at Rs2.55 trillion, which is 21% or Rs436 billion higher than this fiscal year due to war with India. The armed forces development programme has been marginally increased to Rs300 billion, which is far lower than what the military had demanded. The government is projecting gross federal revenues at record Rs19.3 trillion for next fiscal year, higher by Rs1.5 trillion. The gross revenues are based on the FBR's tax target of Rs14.13 trillion and Rs5.2 trillion non-tax revenues. The non-tax income will mainly come from the Petroleum Levy where the government wants to collect nearly Rs1.5 trillion and the Rs2.4 trillion profit by the State Bank of Pakistan. Out of the Rs14.1 trillion FBR tax collections, the provinces will get Rs8.2 trillion as their shares in the federal taxes under the National Finance Commission (NFC) Award. This leaves the federal government with Rs11 trillion net revenues for next fiscal year, which will not be sufficient to meet the interest payments and inclusive of all defence spending. The government will borrow Rs6.5 trillion in the next fiscal year to finance the Rs17.6 trillion total federal budget. Under the IMF programme, the four provinces are also required to save Rs1.46 trillion from their revenues as cash surplus to bring down the national budget deficit to Rs5 trillion or 3.9% of GDP. This is steeper fiscal consolidation and would require all the five governments to meet all their revenue and expenditures related targets. The interest payments will eat 47% of the budget and the federal government's net income —after paying the provincial shares — will be Rs2.8 trillion more than interest payments. The next year's interest payments are estimated at Rs8.2 trillion, which is lower than this fiscal year due to substantial reduction in the interest rates. The finance minister announced a Rs716 billion BISP programme aimed at expanding the net to over 10 million beneficiaries and adding more children in the conditional cash transfer programmes.
Express Tribune
4 hours ago
- Express Tribune
Salaried class gets tax relief
On June 10, Finance Minister Miftah Ismail had announced an income tax relief of Rs47 billion for the salaried class. PHOTO: FILE In a much-needed relief for the tax-burdened and inflation-stricken government employees, the government jacked up their salaries by 10% along with a 4% cut in income tax rate across various slabs in the federal budget unveiled on Tuesday. The government has taken a significant step to provide substantial relief to lower and middle-income sectors, proposing up to a four per cent reduction in income tax across various slabs. In addition, the government also proposed a 1% decrease in surcharge on earning of over Rs10 million per annum. Presenting the federal budget for fiscal year 2025-26, Finance Minister Muhammad Aurangzeb stated that the prime minister had consistently endeavoured to lower taxes on salaried individuals. "Keeping this objective in mind, we have proposed a decrease in income tax across all slabs," he said. "This measure will not only ease the existing tax structure but also strike a crucial balance between inflationary pressures and individuals' take-home pay by alleviating the tax burden," the minister announced, while delivering the budget speech in the National Assembly. According to the budgetary proposal, individuals earning between Rs600,000 and Rs1.2 million per annum are set to receive significant tax relief, as the government lowers the tax rate from 5% to 1%. For those earning up to Rs100,000 per month, the total tax amount comes down from Rs30,000 to Rs6,000. Similarly, individuals in the next slab who earn up to Rs2.2 million per annum will see a 4% decline from 15 to 11% in income tax rate on their salaries. Individuals earning up to Rs3.2 million will benefit from a 2% cut — from 25 to 23% — in the next fiscal year. Meanwhile, in a move to mitigate the brain drain phenomenon, which sees professional human resources facing the highest tax burden in the region, the government has proposed a 1% decrease in the surcharge applied to individuals earning more than Rs10 million per annum. The salaried class paid a staggering Rs331 billion in income tax in the eight months of the current fiscalJulyFebruary periodwhich is 1,350% more than the taxes paid by retailers. The amount was also Rs120 billion, or 56% higher than Rs211 billion collected during the same period of the last fiscal year. Simultaneously, the finance minister also proposed a 10% increase in the salaries of the federal government employees and 7% enhancement in the pensions of retired federal employees. However, he said that high-income pensioners would be brought under the tax net. Finance Minister Aurangzeb said that despite the financial constraints, the government had decided to give a 10% increase in the salaries of government employees from Grade 1-22, with a view to increasing their purchase power. Besides, special conveyance allowance for handicapped employees was being increased from Rs4,000 to Rs6,000. In order to reduce disparities among the employees of various departments, he announced the provision of 30% disparity reduction allowance for eligible employees. This relief, the minister stated, would not only simplify the tax structure but also ensure a balance between inflation and take-home salary. "This move reflects the government's commitment to making taxes fairer and reducing the burden on salaried individuals," the finance minister said. Similarly, the minister announced a 7% increase in the pensions of the retired employees. He said a 5% tax had been proposed on the income of pensioners of up to 70 years, whose annual pension exceeded Rs10 million. He said that no tax would be imposed on the low and middle income pensioners. He said that the pension scheme had been modified through executive orders in the past few decades, which burdened the national treasury. To rectify the situation, the government introduced reforms, such as discouraging early retirement and linking pension rise to the Consumer Price Index (CPI). The finance minister also said that the family pension duration has been restricted to 10 years after the spouse's death, and multiple pensions had been abolished. Upon re-employment after retirement, an individual will have to choose between pension and salary.
