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Govt likely to increase prices of light diesel oil, kerosene oil

* Petroleum Ministry says if prices remain unchanged, government will have to allocate Rs 25bn in subsidy to cap oil prices

By Zafar Bhutta

ISLAMABAD: The government is likely to increase the price of light diesel oil (LDO) by Rs 1.50 per litre and the price of kerosene oil by Rs 2 per litre with effect from October 1.

Sources said that the Petroleum Ministry has moved a summary to Prime Minister Yousuf Raza Gilani in this regard.

The ministry has proposed that the price of kerosene oil should be increased by Rs 2 per litre. They said that there were different proposals regarding the increase in LDO price, which ranged from Rs 1. 50 per litre to Rs 3.50 per litre.

Subsidy: According to the sources, the ministry has also informed the prime minister that if the prices were kept unchanged in the next fortnight, the government would have to allocate Rs 25 billion in subsidy to cap the oil prices, and the prime minister would have to approve Rs 25 billion in differential claims to be paid to the consumers.

The sources also said that the ministry has not proposed a reduction in the price of petrol, adding that it was the prime minister’s prerogative.

They said that the government had decided to end the subsidy on petroleum products by the end of December following a commitment with the World Bank.

They said that currently the subsidy on petroleum products ranged from Rs 10 per litre to Rs 11 per litre but the government intended to end it completely by December. They said that the government was not giving a subsidy on petrol rather it was recovering Rs 20 per litre as Petroleum Development Levy (PDL) on petrol from the consumers to enhance its revenue collection.

The sources said that the government had allocated Rs 140 billion in subsidy in the current financial year -09 to facilitate the consumers of petroleum products but the Oil Marketing Companies (OMCs) had claimed that they were still to recover over Rs 60 billion from the government in terms of price differentials that were still pending.

The OMCs claimed that they were facing problems to place orders for the import of the petroleum products that could cause shortage of diesel in the country.

The government paid Rs 165 billion differential claims to the OMCs during the last financial year 2007-08.On the other hand the government had collected Rs 126 billion duties on the petroleum products during the same year, the sources added.

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