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Thursday, February 15, 2024

Businessmen term fuel price hike ‘bad move’ for PML-N

News Desk |

The Businessmen Panel (BMP) expressed their disapproval of the price hike on the petrol and diesel products, which came into effect from the first of February.

The government on 31st January hiked the prices of petrol by Rs. 2.98 and High-Speed Diesel (HSD) by Rs. 5.92 for the month of February 2018.

The Oil and Gas Regulatory Authority (OGRA) had earlier proposed a double-digit increase in the rates of HSD by Rs. 10.25 per liter, SKO Rs. 12.74 per liter and LDO Rs. 11.72 per liter on the basis of the increase in prices of petroleum products in the international market.

Read more: Pakistan’s fuel reserves fall below strategic levels

Pakistan’s annual inflation climbed to 4.4 percent in January from 3.7 percent in the same month last year primarily owing to the hike in petroleum prices.

The BMP Secretary-General (Punjab), Mian Usman Zulfiqar told a local publication that these heavy taxes on petroleum products was ‘shocking’ and projected the seriousness of the finance ministry for the welfare of the people.

“I think officials of finance ministry are not aware of the implications of the impact on the farmers and businessmen who already face a high cost of doing business and these figures will further disappoint them.”

Usman said high oil prices mean that Pakistan’s export competitiveness will experience a steep drop; with already falling exports, this is not a trend to be taken lightly at this point. “It also raises questions about the decision to depreciate the Pakistani rupee. The logic of depreciation was to make the export sector more competitive but in an import-dependent economy, depreciation is likely to increase domestic prices by a similar amount”, Mr. Usman said.

Pakistan sells petrol for $0.76 per liter, which is the second-cheapest – not the cheapest – in the region after Afghanistan, which ironically depends on Pakistan for its imports.

The logic behind the price hike was that the petrol price had to be jacked up simply because the value of Pakistani currency has gone down and petrol is an imported good. The only way to control its price is to reduce the tax charged to consumers.

BMP Secretary-General further added that the country’s energy import bill has already risen heftily as global oil prices have spiked by almost a third in the last several months… it’s likely to increase considerably going forward and the government failed to put any safeguard measure yet.

Be that as it may, Pakistan seconds Afghanistan when it comes to cheap petrol, according to globalpetrolprice.com, a renowned website. On the other hand, Pakistan stands at number two on the most expensive diesel in South Asia.

The website tracks the prices of petroleum products in 150 countries and publishes them on a weekly basis. It reports that diesel was priced at $0.87 per liter in Pakistan as on February 12, which makes it the second-most costly country for the fuel after India ($1.03 per liter) in the South Asian region. Other regional economies, including Sri Lanka, Nepal, Bangladesh, Bhutan and Afghanistan are selling the industrial fuel at a comparatively lower price than Pakistan is.

Read more: PM considers overhauling as power sector erodes by 27 percent

Additionally, Pakistan sells petrol (motor spirit) for $0.76 per liter to its masses (mostly to motorcyclists and car drivers), which is the second-cheapest – not the cheapest – in the region after Afghanistan, which ironically depends on Pakistan for its imports. Kabul has priced it at $0.65 to the liter. Price of the fuel remains comparatively high in other regional countries, according to the website.

Rising oil prices will add to pressure on the country’s forex reserves, widen trade gap as we spend more on the energy import bill, push domestic power prices, increase the already high cost of doing business affecting export competitiveness, expand budget deficit, spike inflation and squeeze household incomes. Experts on the BMP panel also observed that in light of the upcoming elections in 2018, this could prove consequential for the ruling party.