The ultimate victims are the general masses

Dec 20 - 26, 2004

Despite firm assurances held out by the Minister of State for Petroleum and Natural Resources that government would not allow upward revision of oil and LPG prices till the next budget in June 2005, the Oil Companies Advisory Committee (OCAC) took its own decision of increasing POL products only within two days of the statement.

The POL prices were kept static by the government for the last six month despite an exorbitant increase in the international oil prices. Consequently, the government had to subsidized oil products to the tune of Rs34 billion during last 6 months, says Ahmed Waqar, Secretary for Petroleum and Natural Resources.

The burden born by the government, in fact was in the interest of the economy as the increase in oil prices opens doors for all sorts of inflation. The mounting inflation has already eroded the purchase power of the masses. High oil prices also affect the investment in the industrial sector.

The contradiction between the Ministry of Petroleum and the OCAC in a way also damaged the confidence of the people. The Minister of State for Petroleum and Natural Resources Muhammad Nasser Mengal while speaking at Rawalpindi and Islamabad Press Club on December 11 had said that the policy of capping oil prices was an effective tool to protect the consumers from quick surge in oil prices in the international market and the government adheres to this policy. However, only after three days, the OCAC took the people by surprise by announcing the increase POL products.

As per decision of the OCAC, an increase of Rs2.58 per liter was allowed in Petrol from Rs36.92 to Rs39.50 and increase of Rs1.59 in Diesel from Rs24.37 to Rs25.96 per liter, and kerosene prices increased by Rs1.50.

Next day after the upward revision of the POL prices, the Secretary Petroleum justified the step by saying that during last six months, the government had to bear huge burden of Rs34 billion to keep oil prices stable despite a sharp increase in the international oil prices. The increase, he said was not a true reflection of the actual increase in oil prices as the government has allowed only the minimum side of the increase. The import bill for POL products may exceed to $4 billion mark at the end of the current financial year mainly due to increase in international oil prices.


Although majority of the public transport is now running on natural gas, yet the transporters start making hue and cry for an increase in transport charges.

The transporters who are charging fare on the basis of oil consumption instead plying their vehicles on cheaper gas fuel. This is a contradictory situation and the provincial government instead of accepting the demand of the transporters for increase fares should look into the actual impact because majority of the transporters are consuming cheaper gas fuel.

The exorbitant fares charged by so-called metro bus services require immediate downward revision because they are charging a minimum fare of Rs10 even for a small distance while for long distance they were charging was Rs20 within the city. These fares were fixed on the basis that they would provide better services to the commuters in the air conditioned coaches. Ever since, the metro bus service was introduced it seems no maintenance of the coaches has been carried out. Consequently, the air conditioners of almost all the fleet have gone out of order but they continue to charge the same prices. It is the responsibility of the provincial government to leave the citizens at the mercy of the transporters.

Besides increase in transportation charges, which affects the general prices or essential items because most of the commodities are transported into the city from rest of the country. It is feared that if the government did not keep an eye over profiteers, the general prices may bring a wave of inflation in the country.


The power generation sector is another segment of the economy which is directly due to increase in oil prices. Power sector of Pakistan has a generation capacity of 19,776 mw which comprises of state-owned WAPDA, KESC and IPPS including Hubco and Kapco. Wapda generates around 11,436 MW, KESC has an installed capacity of 1756MW while Kapco produces 1600MW and Hubco 1300Mw. Since the power sector is primarily dependent on thermal power which consumed fuel oil, the power generation is a costly affair in Pakistan. However, the cost of fuel is usually passed on to the consumers. It means that the increase in price of every thing passed on to the consumers. Hence the ultimate victims of the price increase are the general masses.

It is for the first time in the economic history of Pakistan the economy has been brought on the right track and if the engine of growth allowed moving in the right direction, the current state of poverty and economic disparity may be addressed effectively in the years to come.

For achieving the cherished goal of peace, progress and prosperity for the poor of this country, the government would have to subsidize the vital sector of oil and gas and power to ensure and encourage the current trend of economic activities taking place in the country.