Businessmen Panel rejects rise in oil prices

KARACHI: The Businessmen Panel of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has rejected the increase in petroleum products prices for the second fortnight in-a-row ahead of the Eid-ul-Azha, a statement said on Saturday.

The government has allowed an increase in the prices of petroleum products and the liquefied petroleum gas (LPG) at a time when Pakistan’s headline inflation is still in the high range of around 10 per cent, they added.

FPCCI’s Businessmen Panel chairman Mian Anjum Nisar, who is also the former president of the FPCCI, said that the sharp rise in oil prices before Eid is unjustified, declaring it another mini-budget for trade and industry, which was already stuck in the inflation quagmire and facing high cost of production.

After the raise, the price of petrol has shoot up to Rs118.09/litre from the Rs112.69/litre, the price of high-speed diesel went up to Rs116.53/litre from Rs113.99/litre, kerosene price rises to Rs87.17/litre, compared with Rs85.75/litre, and the price of light diesel oil went up to Rs84.67/litre from Rs83.40/litre.

Nisar said that the oil prices and inflation are closely connected in a cause-and-effect relationship. As fuel rates move up, inflation, which is the measure of general price trends throughout the economy, follows the same direction. If the fuel rates fall, inflationary pressures start to drop.

At the start of this month for the first half of July, the government had also increased petrol prices by Rs2/litre, diesel Rs1.44/litre, kerosene Rs3.86/litre and that of LDO Rs3.72/litre.

He said that today the Brent price was almost the same as it was in August 2018 when the government came into power. But now, in the local market, the prices of petroleum products are higher than what they were three years back. In August 2018, when the Brent oil price was $75.5/barrel, the local market price of diesel was Rs112.94/litre; petrol, Rs95.24/litre; kerosene, Rs83.96/litre; and light diesel oil, Rs75.37/litre. Now, when the Brent price is $74/barrel, the petroleum products are considerably high with the petrol being sold at Rs118.09/litre; diesel, Rs116.53/litre; kerosene, Rs87.14/litre; and LDO at Rs84.67/litre.

The government is also charging 17 per cent general sales tax on all petroleum products. Besides, the government is also collecting petroleum levy on these products, which is directly taken from the consumers, he added.

Condemning the jump in the rates of petroleum products, the FPCCI former president called for reducing the tax ratio on oil products to support the trade and industry, as the government has been charging very high petroleum levy and sales tax on petroleum products.

Nisar said that with a view to improve the cash flow of businesses at this crucial time, the government will have to facilitate the industry through reduction in the tax ratio on all items, including the oil products, besides lowering the markup rate, as the country’s economy is going through a challenging phase of the post-Covid-19 pandemic.

At a time when the country’s GDP ratio was very nominal, amid high cost of doing business, the industry needs maximum support and relief, he said, adding that the economy of Pakistan has been severely affected by the coronavirus, as the industries, particularly the Small and Medium Enterprises (SMEs) are striving to deal with the post-coronavirus economic crunch and need to get support.

Instead of providing subsidies or waivers, it is unjust to overburden the industries’ with a hike in the cost of production, he said, adding that an increase in the petroleum products costs will further weaken the economic environment, which was already under threat on various fronts.

The BMP chairman said that the high-speed diesel is used mostly in the transport and agriculture sectors; therefore, any increase in its price will lead to inflationary impact. The price of light diesel oil has also been hiked, which is used in industries.

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