OIL PRICES HIKE PUSH UP IMPORT BILL, INFLATION, COST OF DOING BUSINESS, TRANSPORT CHARGES
Mar 31 - Apr 06, 2008
LAHORE: The soaring oil prices in the international market has pushed Pakistan petroleum import bill up by 33.7 percent during first eight months (July-February) of the current financial year (2007-08) on one hand while on the other hand with rise in petroleum prices the inflation has soared by 17.3 percent over the year to March 20, 2008.
The official figures show that during July-February 2007-08, the petroleum imports stood at the US $6.4 billion as compared to US $4.8 billion in the same period of the last year. After the twice increase made by the Caretaker Pakistan government in petroleum prices, effects on various sectors of country's economy had been felt strongly.
Analysts say the caretaker government took the much delayed but crucial decisions to increase power tariff and petroleum prices as it will help the new government to the extent that it will not be blamed for the hike which will push up prices of most essential goods in the country.
The hike in petroleum prices was necessitated by constant increases in oil prices in the international market but critics said the caretakers should have gone for periodic increases over the last three months, but for some unexplained reasons the decision was delayed. The nine per cent hike in the electricity tariff will increase its price at the consumer end by Rs38 paisa per unit.
The Caretaker Finance Minister Dr Salman Shah said, "We have increased the price to match international prices and to facilitate the new government." He said the caretaker government wanted to reduce the burden on the new government because it could be difficult for it to take such a hard decision in the beginning. Dr Shah said many countries, including India, had recently taken a similar decision and raised petroleum prices in accordance with the international market. "Delay in revision of oil prices was causing direct impact on national budget and therefore, the increase was imperative. But I assure the people that it is the minimum increase," he added.
According to Senator Rukhsana Zuberi, member of the Senate Committee on Petroleum and Natural Resources, the recommendations of the senate sub-committee on oil price mechanism were not implemented despite a lapse of more than four months. She maintained that the prices have artificially been increased by the oil companies in a manner that these are increased by $35 per metric ton by not adhering to Platt's Oilgram prices.
According to her, detailed calculations indicate that the prices of HSD can be reduced by 25 per cent and of other products by 20 per cent if the additional factors/ duties added after 1999 are removed. In case of diesel, if Rs 7.84 charged extra is multiplied with the total consumption of 9.3 billion litres, the people of Pakistan are charged Rs 50 billion extra in one year.
Economists said that petroleum prices had been increasing in the international market for the past few months, but the caretakers as well as the previous Shaukat Aziz led government at the twilight of its tenure were reluctant to take hard decision of increasing the prices because of the election year. They said the direct burden of increase in the prices of petrol and diesel could be avoided had the former government increased the prices systematically.
"There will be a direct impact of oil price hike on the transport sector which will raise transport charges and cause overall price hike in the country," analysts said.
The recent petroleum price-hike has drawn a sharp reaction from transporters as well as politicians, who rejected the increase and termed it anti-people. According to transporters, there was no precedence in the country's history of recent record-breaking oil price hike. If this trend continued, there would be no need for calling strikes as vehicles would automatically be forced to remain off-road, they said, adding that the transporters had earlier demanded that the Oil Companies Advisory Committee be made to review oil prices once in a year or at the most twice a year, but the government did not consider their just demand.
Analysts said the increase in petroleum prices amounts to taxing the people and imposing a mini-budget on them and destroying the sanctity of the national budget. They said that the new Parliament should look into the matter and also take into consideration the World Bank report on oil and gas sector released in July 2003 which had pointed out anomalies and bungling in fixation of petroleum prices.
Political activists termed the recent petroleum products hike a fatal blow to poor masses and stressed that all burden of price hike should not be shifted to them alone. They said there was a wide difference between tall claims of public welfare of the previous government and actual steps taken by it.
When contacted, leading businessman, former LCCI President and Punjab Economic Forum President, Mian Anjum Nisar told PAGE that although the increase in oil prices was overdue but the increasing fuel prices would further escalate production costs and trigger inflation.
Mian Nisar said the country's industry was suffering a lot due to energy crisis, high cost of doing business and high interest rate. Criticizing at banking sector, he said this sector is involved in committing financial terrorism, as depositors are getting nothing while banks are registering huge profits. He called for slashing the interest rate to make the country's manufacturing sector viable.
He also welcomed the induction of new democratic government and said the business community has attached much hopes with the new set up and hopefully it would look into real economic issues and take pragmatic steps for strengthening the country's manufacturing and other sectors.