KARACHI – The government is expected to collect Rs 60-63 billion by the end of June 2011 against a target of Rs 110 billion in FY11, if it maintains Petroleum Levy (PL) at current levels. This time, the government has not only passed on the impact of higher oil prices in the month of February, but has also reverted PL by Rs 3.0 to Rs 5.0 per liter on major oil products.
PL on Petrol and Diesel, which cumulatively contributes 82 percent of the total regulated oil products sales, has been increased by Rs 4.1 and Rs 3.2 per liter, respectively to Rs 6.25 and Rs 3.75 per liter. According to latest numbers, Rs 36 billion of PL has been collected on oil products during the 1HFY11.
However, the figure is still lower than initial PL of Rs 10 per liter on petrol and Rs 8.0 per liter on diesel. That said, the government is still collecting 60 to 63 percent lower than the targeted PL on each liter of petrol and diesel. The recent price review is neutral for Oil Marketing Companies (OMCs), however, chances are high that OMCs in 3QFY11 will incur inventory losses, said Farhan Mahmood at Topline.
Since OMCs margins and refiners’ deemed duty remained intact at 7.5 percent, there is neutral impact on both sectors. However, with continuous rise in ex-refinery prices, there are chances that OMCs may incur inventory gains in 3QFY11.
On the other hand, due to an increase in international diesel prices, deemed duty in absolute terms has increased by 20 percent in the past three months, which will strengthen refinery margins in the 3QFY11.
