SC suspends Carbon surcharge on POL products

Wednesday July 08, 2009

ISLAMABAD: The Supreme Court on Tuesday suspended the operation of notification issued by the Oil and Gas Regulatory Authority (Ogra) on June 30/July 1 pertaining to imposition of 'carbon surcharge' on petroleum products. The court directed the Ogra to issue a fresh notification in compliance with the orders of the court. "This arrangement is being made temporarily; the final decision would be taken on later, after going through the detailed report submitted by the Commission (headed by Justice Rana Bhagwandas looking into the oil pricing mechanism) and other components," said Chief Justice Iftikhar Muhammad Chaudhry in the order. A carbon tax is an environmental tax on emissions of carbon dioxide and other greenhouse gases. In other words it is an example of a pollution tax. In this regard, the court summoned Secretary, Ministry of Environment, on July 9 (next date of hearing) along with the summary (if any) for the purpose of imposing carbon tax. According to budget documents, a development surcharge on petroleum products was levied under the petroleum products (Development Surcharge) Ordinance 1961 and rules were framed accordingly. The word 'development surcharge' was substituted with the words 'Petroleum Development Levy' (PDL) on June 29, 2001. In budget 2009-10, PDL has been converted into 'carbon surcharge' on POL products. Attorney-General Latif Khosa asked the court that it could not withdraw carbon surcharge as it was approved by the parliament through the Finance Bill 2009. Chief Justice Iftikhar Muhammad Chaudhry made it clear that the court had merely suspended the operation of notification issued by the Ogra regarding imposition of the tax. Khosa then pleaded with the court to replace 'carbon tax' with the 'PDL', saying that otherwise the budget, already in deficit, would be disturbed. The court declined to take its words back and asked him to argue the point on next date of hearing, saying, Chief Justice Iftikhar Muhammad Chaudhry observed that 'carbon surcharge' was not the only means to bridge the deficit. Justice Chaudhry Ijaz Ahmed, after being disturbed by the helplessness of the citizen of the country, observed that the spirit of the constitution is welfare of the state and all the organs help in this respect. The document of constitution is made for the people of Pakistan but in last 60 years nothing has been done for them, he added. Advocate Ikram Chaudhry, counsel for Zafar Iqbal Jhagra, censuring the carbon tax, said that saving a poor was much more important than the environment. A three-member bench of the apex court, comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Chaudhry Ijaz Ahmed and Justice Mahmood Akhtar Shahid Siddiqui, heard the petition of Zafar Iqbal Jhagra, of PML-N, against hike in petroleum prices and overcharging worth billions of rupees by the government on petroleum products. According to the Finance Bill 2009-10 and the notification issued by Ogra the government is charging Rs 8 per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil (LDO) and Rs 14 per litre on HOBC. The calculation reveals that the impact of this surcharge is equivalent to 17 percent hike in prices of petroleum products. The court asked Khawaja Saeed Zafar to inform it who had proposed for imposition of carbon surcharge and what was the purpose. In order to ascertain the price difference with imposition of carbon surcharge the court asked Khawaja Saeed to give break-up of prices of petrol, diesel and kerosene oil as it stood on June 30, prior to the issuance of notification, and July 1, after the notification. On June 30, per litre price of petrol was Rs 56.21 and it included Rs 31.91 ex-refinery price, Rs 10.54 PDL, Rs 1.39 oil marketing companies' margin, Rs 2.88 inland freight charges, Rs 1.74 dealers' margin and Rs 7.75 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of petrol per litre was Rs 62.13 and it included Rs 36.59 ex-refinery price, Rs 10 for carbon surcharge, Rs 1.60 oil marketing companies' margin, Rs 3.37 inland freight charges, Rs 2 dealers' margin and Rs 8.57 sales tax. The price of diesel on June 30 was Rs 55.71 per litrer and it included Rs 34.78 ex-refinery price, Rs 8.53 PDL, Rs 1.35 oil marketing companies' margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 7.68 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of diesel per litre was Rs 62.65 and it included Rs 40.94 ex-refinery price, Rs 8 for carbon surcharge, Rs 1.35 oil marketing companies margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 8.64 sales tax. Similarly, the price of kerosene oil on June 30 was 51.87 per liter and it included Rs 32.77 ex-refinery price, Rs 6.88 PDL, Rs 1.46 oil marketing companies' margin, Rs 3.61 inland freight charges and Rs 7.15 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge the price of kerosene oil per litre was Rs 59.35 and it included Rs 39.26 ex-refinery price, Rs 6 for carbon surcharge, Rs 1.74 oil marketing companies' margin, Rs 4.16 inland freight charges and Rs 8.19 sales tax. The court expressed displeasure over change in inland freight charges and dealers' margin, saying that these have to be constant. It was also revealed that sales tax was charged over the cumulative price including other taxes, meaning thereby it was a kind of double taxation. The court termed it illegal, saying that tax on other taxes cannot be levied. At court's query, Mehmood Saleem, Secretary, Petroleum, informed the court that 80 percent of petrol and 30 percent of diesel was produced within the country, and the rest was imported. The court adjourned the hearing till July 9. (BRecorder)