6 non-BJP ruled states have not reduced VAT on petroleum products: govt
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Islamabad: The cash-strapped Pakistan government is examining the possibility of conserving fuel by reducing the number of working days, a move by which it is hoping to save an estimated USD 2.7 billion in foreign exchange, a media report said on Monday.

The estimates are based on three different scenarios in terms of working days and fuel conservation prepared by the State Bank of Pakistan for foreign exchange savings of USD 1.5 billion to USD 2.7 billion, the Dawn newspaper reported.

Pakistan’s total oil imports for the first 10 months (July-April) of the current fiscal year (FY22) has surged beyond USD 17 billion, displaying a massive 96 per cent growth compared to the same period in the last fiscal year, the report said.

This includes imports of petroleum products worth USD 8.5 billion and petroleum crude worth USD 4.2 billion, showing a 121 per cent and 75 per cent jump, respectively, it said.

A senior government official said the relevant authorities power and petroleum divisions had been advised to come up with their estimates, including electricity conservation to take up the matter in a holistic manner with cost benefit analysis of various sectors before reaching a conclusion.

He said the central bank’s estimates mostly covered petroleum products consumption in normal working days a week, including retail business and government offices and educational institutions, which in any case would be on summer holidays.

It, however, did not take into account LNG imports, which mostly go into the power sector.

During the first 10 months of the current fiscal year, LNG imports amounted to USD 3.7 billion, showing an increase of 83 per cent, though import quantities were on the lower side.

These estimates suggest that additional petroleum related consumption for one more working day a week would cost the nation about USD 642 million in terms of commuting, which does not include freight and transportation.

Conversely, reduced consumption with one less working day a week provides an annual savings of about USD 2.1 billion.

All saving numbers are taken for net reduction in oil import but subsidy on petroleum products could also come down by PKR 3.5 billion per day.

In the first case, based on four working days and three holidays in which retail is open like a weekend, the average petroleum saving is estimated at USD 122 million a month or USD 1.5 billion a year.

It may be noted that 90 per cent of oil consumption is assumed for working days and the remaining 10 per cent for holiday in a month.

In the second scenario, based on four working days, two holidays and one day of lockdown (retail to remain closed for one day), the savings in the form of reduced oil imports is estimated at USD 175 million a month or USD 2.1 billion a year.

In the third scenario, based on four working days, one holiday and two days of lockdown (commercial activities to remain off for two days), the petroleum linked saving in import bill could be around USD 230 million or about USD 2.7 billion, it said.

This case, however, is considered too harsh as it could negatively affect public confidence.

Officials said the Power Division had advised the new government soon after it came to office to go for reduced working days and limit commercial activities to daylight and launch a national energy conservation drive across the energy consumption sectors with electricity saving of more than 5000MW.

Prime Minister Shehbaz Sharif chose to increase working days from five to six days a week that had an additional burden in the form of higher electricity and petroleum consumption, the report added.

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