The Khyber Pakhtunkhwa (KP) government has proposed that the Finance Ministry allow it to impose federal excise duty (FED) at the rate of Rs 1,000 per barrel on indigenous crude oil in the Finance Bill 2018-19. The government of KP cited Article 161 (b) of the Constitution as justification which stipulates that "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 Consolidated Fund and shall be paid to the Province in which the well-head of oil is situated."

In April 2017, the KP Assembly declared denial of the right to impose FED on indigenous oil as violative of the Constitution. A joint resolution was passed in the provincial Assembly against Finance Bill 2017 for not allowing the province to determine the duty on crude oil.

The provincial government has also argued that Oil and Gas Regulatory Authority (OGRA) includes this duty while fixing the price of petroleum and products. The provincial government argues that this will help increase revenue receipts of the province which, in turn, may be used for further oil and gas exploration activities, job creation and boosting the national economy as a whole. The proposal to allow the KP government to determine the FED on indigenous oil was made during the federal budget 2017-18 and the Federal Board of Revenue (FBR) responded that as a revenue collecting agency it had no objection to the proposed demand. However, any imposition of the duty would spike the price of POL products, it warned.

An official of KP Oil & Gas Company Limited (KPOGCL) told Business Recorder that any hike in price of petroleum and products due to imposition of this levy can be adjusted with petroleum development levy (PDL) or Gas Infrastructure Development Cess (GIDC). Since both PDL and GIDC are domains of Ministry of Petroleum and Natural Resources, the views/comments on this matter may be taken from the concerned Ministry, he added.

Copyright Business Recorder, 2018