Govt wants to placate IMF into cutting revenue target
Oil sales dip 10pc
Country's total oil sales in the first seven months of the current fiscal year ( 7MFY20) plunged by 10 per cent to 10.139 million tonnes, mirroring a slowdown of economic activities. Furnace oil sales in the last seven months shrank by 32pc to 1.395m tonnes followed by 10pc drop in high speed diesel (HSD) to 3.837m tonnes. Petrol sales in 7MFY20 grew by 3pc to 4.455m tonnes.
In Jan 2020, total oil sales came down to 1.349m tonnes from 1.558m tonnes in the same period a year ago. Furnace oil (FO) sales in Jan 2020 fell to 212,000 tonnes from 360,000 tonnes in same month a year ago while HSD sales dropped to 478,000 tonnes from 537,000 tonnes in Jan 2019. According to Top Line Securities, furnace oil sales plunged due to government's policy of moving away from FO-based power generation while HSD sales remained depressed amidst slow economic activities.
However, on a sequential basis, oil sales witnessed limited decline of 2pc month-on-month (MoM), supported by 88pc MoM higher FO off take given government allowing partial resumption of FO-based power plants to support the local refineries and possible exports by Byco Petroleum (Byco).
According to the brokerage house, Pakistan State Oil's sales declined by 16pc year-on-year (YoY) and 10pc MoM in Jan 2020. However, during 7MFY20 sales remained 6pc YoY higher. Attock Petroleum's sales were down 13pc YoY and 9pc MoM in Jan-2020, while Hascol Petroleum's (Hascol) volumes were up 17pc YoY and 17pc MoM.
PSO's market share was estimated to have shrunk by 39pc in Jan-2020 compared to its 7MFY20 average of 45pc. Fall in diesel sales can be attributed to persistent drop in truck and bus sales.
On the opening day of its two-week discussions with a staff mission of the International Monetary Fund (IMF), the government appeared set to increase gas rates from Feb 1 to placate the international lender into reducing revenue target for the current fiscal year.
On Monday, the cabinet division called members of the Economic Coordination Committee (ECC) of the cabinet to meet to take up "natural gas sales pricing FY2019-20 with effect from Feb 1, 2020" summary moved by the petroleum division.
Separately, the staff mission of the IMF had initial discussions with the Federal Board of Revenue (FBR) which reportedly sought a further downward reduction in revenue collection target for the current fiscal year in view of a massive Rs385 billion shortfall in the first seven months ending Jan 31, 2020.
Adviser to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh told media persons that the talks between the IMF mission and the government team had begun. He said the IMF loan programme to Pakistan was continuing under which IMF was providing $6bn loan and extending support for economic reforms.
Two-week negotiations with IMF mission begin
He said progress on the implementation of IMF programme had started showing results and investment was pouring in from across the country. He said the government was taking steps to control inflation and exchange rate had also stabilised while the funding for Ehsaas Programme had been almost doubled with the support of the IMF. He said the nation would see a gradual reduction in the price hike.
Informed sources told Dawn that in view of difficulties on the revenue side, the government wanted to deliver on a "low hanging fruit" of increasing gas and electricity rates. These sources said that while increase in electricity rates through regulatory approvals and imposition of surcharges may take weeks to materialise, the increase in gas rate was ready and should in fact have taken place with effect from Jan 1, 2020.
An official said the government intentionally delayed the gas price increase in view of high consumption period of extreme winter conditions.
Another official said the FBR authorities briefed the IMF delegation in detail about Rs2.410 trillion tax collections in first seven months of the fiscal year and the reasons behind the Rs385bn shortfall. It was reported that the FBR would now have to reach a collection target of Rs3.520 trillion by end-March. It was argued that economic conditions were not conducive to collect more than Rs5 trillion revenues by end of the year and hence the target should be revised downward.
The official said the authorities were yet to start policy level discussions with the IMF but they would have to ensure some deliverables to ensure smooth progress on remaining targets. The government had given an undertaking to the IMF to make adjustments to gas tariff by end-December 2019 based on Ogra's midyear decision on tariffs.
It has also committed to reducing gas losses under an ECC approved plan for two gas companies. The three-year plan envisages an annual loss reduction of 1-2 per cent through improvements in infrastructure, rehabilitation of networks and theft control.
The ECC would now take up a revised summary for up to 15 gas price increase in line with the prime minister's guidelines to minimise the burden on domestic consumers. Ogra had determined up to 214pc increase in gas rates for certain consumer categories but the petroleum division changed the proposals.