Page last updated at 08:02 GMT, Thursday, 9 July 2009 09:02 UK

Pakistan imposes new petrol tax

Pakistani petrol station employees wait for vehicles in Islamabad on July 1, 2009.
Petrol prices have been returned to their previous level

Pakistan's government has imposed a levy to offset revenue lost because of an earlier Supreme Court decision to cut a carbon tax and reduce oil prices.

On Tuesday the court cut the carbon tax imposed by the government, bringing down oil prices by more than 10%.

But officials said the government would lose $1.52bn because of the tax cut.

President Asif Ali Zardari issued an ordinance on Thursday imposing a levy which effectively returns oil prices to their previous levels.

Prior to the court order, one litre of petrol was being sold at 62.13 rupees (77 US cents) and diesel at 78 cents.

Following the court order, petrol prices on Wednesday fell to 63 cents while that of diesel fell to 66 cents.

Officials say they feared the loss of revenue as a result of the court decision would increase the budget deficit beyond the limit approved by the International Monetary Fund (IMF), which is funding the Pakistani budget.

Judicial intervention

Wednesday's court order has renewed a debate on "judicial activism" in Pakistan.

The BBC's M Ilyas Khan in Islamabad says this is over the extent to which the judiciary can intervene in the affairs of the executive without undermining the latter's ability to perform its functions.

Tuesday's Supreme Court order slashing the tax was issued by a three-member bench of the court, headed by Chief Justice Iftikhar Mohammad Chaudhry.

The Supreme Court under Mr Chaudhry first intervened in financial initiatives in 2006 when it reversed a decision made by the government to sell a public sector company, Pakistan Steel Mills Ltd.

That decision was widely acclaimed for preventing an unpopular government - led by a serving army general - from selling off what was seen as the country's "family silver" at a throwaway price, our correspondent says.

But the latest order has come in for some criticism.

Critics argue that the carbon tax - an environmental tax levied on carbon emissions - was made part of the oil price through a finance bill that parliament approved unanimously last month.

Any alterations to the bill amount to judicial interference in the affairs of the parliament which is the supreme law-making body, they say.

The lawyers who challenged the carbon tax say they are now contemplating a challenge to the new tax as well.

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