ISLAMABAD  -    Sindh has demanded to increase of federal excise duty (FED) on natural gas by 80 percent from the existing Rs 10 per MMBTU to Rs 18 per MMBTU and impose 5 percent duty on crude oil.

Freezing of FED rate for natural gas at Rs 10 per MMBTU and non-imposition of FED on crude oil has been badly affecting provincial revenue resources and it is therefore requested to add the increase rate of FED on gas and crude oil in the next budget 2019-20, Chief Minister Sindh Murad Ali Shah said in a letter to Abdul Hafeez Shaikh, advisor to the Prime Minister on Finance, Revenue and Economic Affairs.

According to the letter, available with The Nation, Chief Minister Sindh said that the rate of federal duty of excise on natural gas was last fixed at Rs 10 per MMBTU through finance act. There is no change in the rate since then, despite the fact that the real value of Rs 2010 has reduced, in terms of year 2019 to around Rs 5. Moreover, had the rate been linked with the CPU then it would have been over Rs 18 per MMBTU today.

Similarly, the letter said that federal excise duty on crude oil was last levied at the rate of 5% ad valorem through Finance Ordinance 1982 (CED then) which remained in force till 1995.There is a need to revive the levy of FED on crude oil in accordance with the provision of Article 161(1)(b) of the constitution with the view to providing adequate revenue resources to the provinces as per the constitutional provisions.

The letter demanded upward revision in the rate of FED on natural gas from existing rate of Rs 10 per MMBTU to at least Rs 18 per MMBTU. Moreover specific rate of FED on natural gas may be linked and adjusted with the CPI in the future annual budgets.

FED on crude oil, at the rate of 5 percent ad valorem, may be levied as it was done in the past and the receipts so collected be directly transferred to the provinces concerned as straight transfer.

It is pertinent to mention here that Sindh produces 31371.06 barrel per day (34.72 percent of the total national production of crude) of oil and 2489.40 MMBTU of gas (63.37 percent of total natural gas production)

According to the provision of 18th Amendment, “The net proceeds of the federal duty of excise on oil levied at well head and collected by the federal government, shall not form part of the federal part of the federal consolidated fund and shall be paid to the provinces in which the well head of oil is situated”. The provinces of Baluchistan, Khyber Pakhtoonkhwa (KP) and Sindh have been demanding the imposition of excise duty on the crude oil wellhead prices, so they can get their billion of rupees share.

Meanwhile, a source said that the issue FED was also discussed in the meeting of the finance secretaries held in Islamabad on September 24, 2013 where it was decided that the government Sindh shall prepare a comprehensive proposal in relation of federal duty of excise on oil. The proposal after obtaining feedback from other three provinces shall be forwarded to FBR in a form of reference for examination. The Khyber Pakhtunkhwa government supported the proposal of Sindh government for legislation of amendment in the Federal Excise Act, 2005 and the Custom Act, 1969 together with other enabling statutory instruments. It was proposed that a levy of Rs 1000 per barrel or Rs 6.29 per litre be imposed on crude oil.  

It is a pre-requisite under 18th amendment that the government will impose excise duty on the local produced crude oil but for the last 9 years the government using different pretext to avoid its imposition, the source maintained. According the source under the 18th amendment the federal government will collect the excise duty on crude oil and will distribute it among the provinces as per their share of crude oil production.