The recent increase in the petroleum products had an
immediate sharp affect on sensitive commodities prices; it will also
affect Pakistani export apart from long-term negative affects on
national economy. The Oil Company Advisory Committee (OCAC) has now
brought POL prices to its record high level giving reasons of POL prices
increase in international market.
For the last six months, government capped the POL
prices and did not allow OCAC to increase the prices. But within last
one month OCAC increas remarkable amount with a justification that
during last six months government and OCAS suffered loss of Rs. 37
billion. Soon after the announcement, transport sector reacted sharply
and increased transportation prices at their own while transporters
bodies have warned an indefinite strike if POL prices were not brought
down at its six month ago level.
The prices of essential commodities including, atta,
sugar, tea, vegetables, meat, poultry and fresh milk has shoot up very
next day after the increase of the POL prices and more affects are
definitely underway. Sharp increase in commodities were the result of an
immediate increase in transport sector which is now
"unchecked" and "uncontrolled" by any authority.
However, Karachi Transport Ittehad, the bodies of transporters
associations have demanding increase in the local fair tariff if POL
prices are not brought down at the level where that was six month ago.
Transporters, however, are emphasizing on diesel prices while there is
no voice against increase in the petrol prices, which have now gone to
the above Rs. 40. OCAC sources said that POL prices might go further up
within few months.
President, Karachi Chamber of Commerce and Industry (KCCI),
Mian Abrar Ahmed had also reacted when OCAC announced first increase in
the POL prices in December last. He had urged the government to keep
petroleum prices unchanged till June next so that the industries could
face the challenges of globalization in post-2005 scenario. He said
seven per cent increase in petroleum prices will bring a negative effect
on transportation charges of import-exports cargo, electricity fuel
adjustment charges, maintenance cost and the collective affect on the
cost of production.
The KCCI had said it would have been prudent if the
current policy of absorbing increasing cost continued to prevent blowing
impact on the industries, particularly those which are running on diesel
power generation and also in view of the fact that international price
of petroleum products has eased now. The KCCI had expressed surprise
over the increase saying that Minister for State Petroleum and Natural
Resources had very categorically stated a week before that the
government would not raise the oil prices for next six months ending
June 30, 2005. Other people from business sectors including Abdul
Rasheed and Khalid Iqbal Siddiqui of Invest Capital and Securities said
the inflation rate for January 2005 will witness the impact of hike in
petroleum prices. Petrol and diesel hold a combined weight of close to
two per cent on CPI basket. However, the impact of this price rise is
more pronounced in its indirect nature. Fuel and lighting and transport
and communication are impacted. Food prices are also affected to an
extent because of price hike in diesel. Murad Ansari of Khadim Ali Shah
Bukhari Securities said that the government's taxes on petroleum prices
remain at zero whereas the oil marketing companies are the major
beneficiaries of this price increase. He calculated an inventory gain of
Rs 477 million for PSO and Rs174 million for Shell as a result of latest
price increase. He said that upward revision in prices came as a major
surprise as most of the statements coming out were indicating that the
government would maintain oil prices till June 2005.
Production cost has automatically gone up especially
in cottage industry while power production charges is another threat for
citizens. Textile export would be badly affected, as 'hand-made fiber'
cost would automatically increase. The increase of POL prices have
started giving very negative affects at large scale. Apart from prices
of sensitive commodities it would have negative affects overall on
Pakistan's economy. The statistic department of Pakistan's Karachi
office said that they were collecting data of an unpredictable price
increase of sensitive and essential commodities, however complete report
would be available after few months.
Whole sellers and retailers said that trend of price
increase indicate that prices of essential commodities would not
completely reduce even if POL prices come down. This negative affect
would further increase 'living cost' in the country which would badly
affect the people living blow the poverty level.
Economists from various sector of the country during
debates on electronic media recently have warned that there would be
devastating results if prices of POL were controlled on its due demand.
They said whole economy of the country would go on negative track if POL
prices left in the hands of people who do not seem to possess the
capability of understanding national interest.
For a strong and smooth national economy, Pakistan
has subsidize the POL prices. Doesn't matter what it cost to the
government revenue but for Pakistan's economy badly needs it. At the one
hand government claims that "we have got rid of IMF" at the
other hands we are still succumbing before IMF on the most sensitive
issue like POL prices. We have to review neighboring country Iran where
government is spending two billion dollars per year in shape of
subsidizing the electricity to cap labour cost and other power sectors.