BUSINESS COMMUNITY REJECTS PRICE FIXATION FORMULA OF PETROLEUM PRODUCTS

KANWAL SALEEM
(feedback@pgeconomist.com)

Oct 1 - 7, 20
12

Business community has reacted sharply over price fixation formula of petroleum products and has urged the government to revisit this formula and make it acceptable to business community that is the main stakeholder to all economic policies.

How a businessman would be able to calculate the prices of his merchandise when he is unaware of their input cost, they questioned? It is not the electricity alone that has destroyed economic activity but the government itself is responsible for economic meltdown by taking steps like repeated hike in petroleum products. "If repeated increase in the fuel prices would be made, the entire economy would suffer and the same happened in Pakistan in the last many months as the repeated hikes in the POL prices had ruined the industrial and economic activities."

Business community was unable to understand that under what law the government is making repeated upward increases in the petroleum prices when it always makes POL products purchases for three months. It is only because of high cost of doing business in Pakistan, a large number of industrial units had already shifted their operations to other countries and the time and again hike in POL products would force more industrialists to shift their industrial units, business leaders said.

Since the government is mostly relying on electricity production through thermal means and after increase in petroleum prices, prices of electricity would further increase rendering people unable to make their both ends meet.

It may be noted that Rs323 billion was collected last year from the General Sales Tax on petroleum products, with Rs198 billion going to the provinces. The PDL brought another Rs69 billion to the national exchequer.

On the other hand, the margin of oil marketing companies (OMCs) in Pakistan was lowest at only two per cent as against six to eight per cent prevailing internationally.

The Lahore Chamber of Commerce and Industry (LCCI) President Mr. Irfan Qaiser Sheikhurged the government to complete water and hydropower projects in the shortest possible time as an acute shortage of electricity is hitting hard the economic activities in the country.

According to him, timely completion of hydropower projects was vital for mitigating water and power shortfall. The government should ensure equal supply of electricity throughout the country as the province of Punjab is the worst hit by the electricity shortage and only last year it lost three per cent of its GDP due to power crisis.

The LCCI President said that due to longer hour power cuts the investment scenario has spoiled in the province and so much so existing industrial units have curtailed their productions. Despite a consensus decision at the Energy Conference held on April 9th 2012 and a pledge by for equal load shedding across Pakistan, the electricity consumers especially the province of Punjab continue to suffer from unjust and prolonged load shedding.

He said that the acute electricity and gas shortage has not only crippled the trade and industry but has also brought widespread unemployment and poverty. He said that the consumers of the efficient distribution companies with lowest line losses and the highest recovery ratio are being treated unfairly.

Mr. Irfan Qaiser Sheikh said that LCCI has repeatedly warned the government of massive lay-offs and industrial closures if it fails to immediately stop power outages but people sitting on the helm of the affairs are playing the role of silent spectators. The industry needs continuous supply of electricity to keep the units operational and to complete the export orders well within the given timeframe but only because of the shortage of electricity the exports are not up to the mark.

The LCCI President warned the government of serious consequences if it makes any further increase in the prices of petroleum products. He was of the view that the timeline for the increase in the prices of petroleum products was also raising questions because at a time when the whole industry was suffering due to energy crisis and high cost of doing business, the raise in POL prices is bound to give a death blow to the industry.

Businessman and PML-N leader Mohammad Pervaiz Malik observed that the price hike of POL would adversely affect the industrial, agricultural and transport sectors, enhance prices of edible and non-edible items and multiply suffering of the common man. He said the power tariff would go up as fuel adjustment charges would increase.

He demanded of the government to freeze petroleum development levy (PDL) and come up with a transparent mechanism for price fixing. "For heaven's sake decide once for all what system is to be followed."

He said the government was earning Rs38-40 per litre on petrol and claimed that it earned Rs250 billion from taxes last year.

He said that total deregulation of pricing mechanism with weekly price revision will make it difficult to watch the companies and ensure regular supplies to the consumers in remote areas of the country.

He said that the private sector has already started hoarding and black-marketing in the wake of oil prices announcement on fortnightly basis; weekly prices will give it more power to manipulate masses. New pricing mechanism will not absolve the government completely of its responsibility; it should allow Ogra to continuously monitor prices at retail outlets and direct CCP to thwart any possible collusion among the players, he added.