Govt mulls petroleum levy increase to clear gas circular debt

ISLAMABAD: The government is considering increasing the petroleum levy by Rs5 per litre as part of a strategy to settle Rs1.7 trillion in gas sector circular debt, sources said.

Under the proposed plan, the debt would be retired over the next six years by raising approximately Rs550 billion through additional levy collections, utilising dividends from state-owned gas companies, and diverting savings achieved by reducing the number of imported LNG cargoes.

The total gas sector circular debt currently stands at around Rs3.18 trillion, of which Rs1.7 trillion is planned to be settled under the strategy. Of this amount, approximately Rs1.4 trillion comprises non-recoveries, line losses, and tariff differentials, while about Rs300 billion relates to taxes and interest.

According to the proposal, dividends received from gas companies would be redirected to help clear the circular debt. The additional Rs5 per litre petroleum development levy (PDL) on petroleum products is expected to generate around Rs550 billion.

The plan to eliminate the gas sector circular debt will be submitted for approval to the Prime Minister’s Office and the Ministry of Finance, sources added.

Earlier, it was reported that a substantial decrease in petroleum prices, potentially up to Rs 11.85 per litre, is likely to take effect from December 16, according to sources who cited initial working for petroleum goods.

The largest decline is expected in the price of High-Speed Diesel (HSD). Sources suggest a slash of Rs 11.85 per litre, which would bring the new diesel price down to approximately Rs 270.80 per litre.

On the other hand, the price of Kerosene Oil is likely to be reduced by Rs 11.70 per litre, while Light Diesel Oil (LDO) prices may decline by Rs 10.10 per litre.

The Oil and Gas Regulatory Authority (OGRA) will send the final working on the petroleum prices to the Finance Ministry on December 15.