Skyhigh Fuel Prices

Exorbitant fuel prices are not only impacting travelling expenses of the common man but are also contributing to the increase in prices of daily use items, especially food commodities like vegetables, fruits, eggs, bread, etc. The rise in petrol prices has pushed up the cost of consumer goods which has had a direct impact on the common man.

Speaking about his ordeal, Muhammad Younus, a laundry owner in Karachi, said that he has a family of eight; making his ends meet has become very difficult due to the lockdown and inflation. The closure of his shop under the lockdown restrictions, and a spike in the day-to-day necessities of life is making life hard for them.

The price of petrol hit its highest level in the history of Pakistan after the government increased the prices by Rs1.71/litre, bringing the new rate at Rs119.80/litre from August 1, 2021; while the price of high-speed diesel (HSD) in Pakistan was kept unchanged at Rs116.53/litre for the first fortnight of August.

On July 15, the government had raised the petrol price to Rs118.09/litre from Rs112.69/litre, high-speed diesel to Rs116.53 from Rs113.99, kerosene to Rs87.17/litre from Rs85.75 and the light diesel oil from Rs83.40/litre to Rs84.67.

The government appears to have failed in employing a policy to resolve the constant rise in the basic food commodities, despite feedback about the impact of the rising petrol prices from the country’s apex trade body. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Businessmen Panel had rejected the increase in prices of petroleum products at a time when the country’s inflation is still in the high range of around 10 percent.

Highlighting the problems being faced by the businessmen and small traders, FPCCI Businessmen Panel chairman Mian Anjum Nisar had repeatedly said that the oil prices and inflation are interrelated in a cause-and-effect relationship.

With the fuel price hike, inflation will follow the same path. However, when it comes to lowering the fuel rates after a decline in fuel prices, inflationary pressures remain almost the same only because of the lack of check and balance mechanism on the part of the government.

In order to improve the cash flow of businesses at this crucial time, the government needs to facilitate the industry through reduction in tax ratio on all items, including the oil products, besides lowering the markup rate.

According to Nisar, at a time when the country’s GDP ratio was very nominal, amid the high cost of doing business, the industry needs maximum support and relief. The economy of Pakistan has been severely affected by the coronavirus pandemic, as the industries, particularly the Small and Medium Enterprises are striving to deal with the post-coronavirus economic crunch. They need to get support but instead of providing subsidies or waivers, the government is unjustly overburdening the industries with a hike in the cost of production. Therefore, an increase in the petroleum products prices will further weaken the economic environment, which was already under threat on various fronts.

In a move to provide relief to the masses, the government has significantly reduced the sales tax rate on petrol to 10.77 percent from 16.40 percent. It has also claimed that the petroleum prices are the lowest in the region.

Defending the PTI government’s policies, Federal Minister for Information and Broadcasting Fawad Chaudhry had said that the government has no other option but to increase the petrol price because of the rising international market prices. Oil prices in the international market jumped almost 62 percent to $68.28/barrel on August 6, 2021, compared with $42.24/barrel on August 13, 2020, while the fuel prices in Pakistan rose 15.20 percent to Rs119.05/litre, at present, compared with Rs100.95/litre in August 2020, which supports the government’s arguments.

Similarly, the existing value of the Pakistani rupee is 2.78 percent higher against the dollar at 163.45 on August 6, 2021, compared with 168.13 in August 2020.

Feeding the lower strata of the society, especially the poor, remains the sole responsibility of the governments across the world, but the Pakistan government seems to have little room to maneuver or is clueless in making effective strategies to deal with such a situation.