High taxes imposed on petrol to keep diesel price low, court told
By Our Staff Reporter
ISLAMABAD, Jan 22: The federal government on Monday told the Supreme Court that it had consciously and deliberately imposed heavy taxes on petrol to keep the price of diesel, the main fuel running the national economy, as low as possible.
A nine-member bench has taken up identical petitions challenging oil pricing mechanism by a group of three petitioners -- Maulvi Iqbal Haider, PPP’s Senator Rukhsana Zuberi and PML-N Secretary-General Zafar Iqbal Jhagra.
Led by Chief Justice Iftikhar Muhammad Chaudhry, the bench dismissed Maulvi Iqbal Haider’s petition for non-prosecution but deferred further proceedings for Feb 19 on the request of Senator Zuberi and Zafar Jhagra's counsel Muhammad Ikram Chaudhry, to study federal government’s reply to their petitions.
The bench also declined to accept a request by Senator Zuberi, urging it to direct the government to provide access to a very expensive Singapore-based website called Platt Oilgram, which deals with oil pricing mechanism.
Attorney-General Makhdoom Ali Khan submitted the reply and explained that the federal government had accumulated a liability of Rs46.4 billion in subsidies (or price differential claims) to oil marketing companies (OMCs) between May 2004 and June 2007 for keeping the prices of diesel and kerosene oil at ‘tolerable levels’ against an equal amount through petroleum development levy collected during the same period.
Defending its pricing policy as both objective and comparatively reasonable, the government explained, the tracking day-to-day fluctuations of international petroleum market prices was neither possible nor desirable ‘in the interest of the people’.
The government pleaded before the apex court to dismiss the instant petitions by imposing penalties on the petitioners since not a single instance had been identified by them to suggest when petrol had been sold at a price higher than the price determined in accordance with the approved pricing formula.
As such, the allegations that the petrol has been sold at illegally high prices was entirely unsustainable, the government insisted.
Referring to the delegation of powers to the secretary of the Oil Companies Advisory Committee (OCAC) to determine oil prices, the government in its reply said, the same had become infructous following the withdrawal of such powers and their transfer to the Oil and Gas Regulatory Authoruty (Ogra). Besides, the powers delegated to the OCAC were also not unconstitutional as precise guidelines were provided for the exercise of the authority.
It also explained that the fixation of petrol prices was not ‘purely an act of the petroleum ministry. Instead, the federal government had to apply ‘its mind’ on every occasion to determine the quantum of the petroleum development levy and whether it should be imposed on a particular product or not.
Referring to the fixation of ex-refinery prices as ‘deemed duty’, being challenged by the petitioners as illegal, the reply said it was not a tax as no portion of it was paid to the federal government. Instead, the ex-refinery price was the price which was paid to the refineries -- entities entirely distinct from the federal government. ‘Deemed duty’ was a mechanism to set ex-refinery price of petroleum products in relation to international prices while permitting at the same time some degree of tariff protection to local refineries.
“Petroleum refineries, considered to be major national strategic assets, are very expensive to set up, therefore it is necessary for the federal government to ensure that the refineries in Pakistan continue to stay in operation,” the reply justified.
On the other hand, the federal government has also vested interest in ensuring that the refineries do not use their position to over-charge customers.
In their petitions, Senator Zuberi, who is also a member of Senate sub-committee on oil price mechanism, had requested the Supreme Court to order forfeiture of Rs160 billion, the amount over-charged by different oil companies. She had also sought a direction against the federal government to undertake functions of pricing in consultation with the local industry, public representatives and consumers especially when no fixed pricing formula had been elaborately enunciated by the government.
Zafar Jhagra has sought reduction in the ‘artificial’ prices of petroleum products and a restraining order against the OCAC from further increasing prices pending decision in the apex court.