Generally speaking, the price inflation is attributed
to the soaring international oil prices which are instrumental in
enhancing the cost of production especially in the oil-fired mechanism
from transportation to power generation or on a variety of industries.
However, the impact is not truly reflected when the
oil prices move in the reverse direction.
In the context of Pakistan, the unbearable price of
electricity is due to oil prices and of course the stupid decision of
purchasing power from IPPs in dollar terms by the previous governments.
However, when oil price cycle has started moving in
the reverse direction and the prices have gone down considerably during
last three months, yet the impact is not visible neither in electricity
charges nor the transportation charges be it air, rail or road.
Recently, the Oil Companies Advisory Committee (OCAC)
has announced a cut in prices of POL products for the fourth consecutive
fortnight during last two and a half month, but unfortunately except a
one rupee decline in the fares of bus and mini buses, the impact is
really reflected in other sectors of the general consumer items.
Since March when the oil prices were at peak due to
various reasons including Iraq war, the oil prices have declined
considerably. The price of motor gasoline depicted a decline of 22.2
percent to Rs28.88 per litre, High Octane 21.2 percent to Rs32.40 per
litre, kerosene oil 24.7 percent to Rs18.53, high speed diesel by 23.22
percent to Rs19.91 and light diesel oil by 23.2 per cent to Rs16.09.
In the wake of significant drop in the prices POL
products, the prices of polyester staple fibre (PSF) came down recently
and may further decline. The end users of PSF in the textile industry
are however of the view that although PSF prices have come back to the
original level of Rs60 per kg but the world prices are still much lower
than the local prices.
Last week, PSF prices were 80 cents per kg in the
world market which translates into Rs47 per kg but the price in the
local market is still higher than the international prices. The
government has imposed 20 per cent duty on import of PSF to protect the
local manufacturers. However the industry is of the view that even if
the 20 per cent duty is added to the imported PSF price, the cost along
with transportation and other charges comes to Rs58 per kg. However, the
industry feels that how long the umbrella of protection would be
provided to a certain industrial sector after the implementation of the
WTO rules in 2005 when the tariff regime would come to an end.
The real benefit of this considerable decline in oil
prices has not been passed on to the consumers except a cut of one rupee
in general transport charges which is merely an eye wash and does not
translate the actual impact on prices.
Though the poverty alleviation is claimed to be one
of the top priorities of the present government and some steps are also
being taken in this direction, yet there is an immediate need to look
into the factors which are proving counter productive to the government
efforts for poverty level in Pakistan.
Socio-economic experts are of the view that people
have to spend more on utility bills, education fee of the children and
transport charges as compared to the expenditures on food items and
groceries. People of average income are unable to pay the electricity
charges hence they have no option but to use electricity through illegal
connection (kunda) system causing huge losses running in billions of
rupees to KESC and WAPDA on account of line losses or power theft. A
large number of families unable to pay the high fee of the private
sector education institutions are forced to send their children to the
low standard education center. The transfer of children from good
institutes to sub-standard education centers may help reducing the
monthly expenditures of the middle income group families, but
ultimately, this undesirable process may produce a crop of youngsters
with poor knowledge and education standards. Will this undesirable
development help poverty alleviation or add to the growing number of the
The economic manager have done marvelous job by
producing outstanding economic results such as unprecedented level of
foreign exchange reserves reaching to the height of $11 billion,
impressive growth in home remittances which cross the level of $4
billion during the current financial year, hitting the export target of
$10.4 billion as well as achieve the revenue target. All these
achievements seem to be a miracle when one recalls the nightmare of
sinking economy three years ago. The country was about to be declared as
a failed state. The national economy was not in a position to bear the
huge burden of the debt servicing and the defence expenditures consuming
the 87 per cent of the total budget.
The economy has taken a turnaround. The plus the
economy has achieved have not given reasons to the general public for a
smile. Masses of this country have gone through much difficult times and
they are justified to anticipate some relief from the painful bills of
education, utilities and transport. Achieving the revenue target and
increasing the size of revenue for next year without expanding the base
of tax payers may serve the kitty of the government but would certainly
add to the problems of the people.