Dec 7 - 13, 2009

The recent surge in prices of petroleum products will badly affect the overall economy of the country by rising cost of production for all industries that will ultimately render the export sector of the economy uncompetitive in the globalised competitive environment.

On internal side, the Federal Board of Revenue is giving an indication of levying more taxes, if revenue targets are not achieved while on external front, exporters are facing more and more difficulties due to high cost of doing business in the country. This will definitely result in decline in exports that will exert more pressure on the economy facing difficult time.

Economic experts and businessmen are of the view that increase in the prices of petroleum products will not only negatively affect industrial and agricultural productivity but will also have an adverse impact on the whole economy.

This would propel general inflation, and ultimately the price of daily use items would increase with rise in transportation costs. At the time when the country is suffering from energy crisis and high cost of doing business, the rise in petroleum prices is bound to be a "hard slap to industrial outputs," they believe.

The economists also agreed that the government had no choice but to increase the POL prices in line with its agreement with the International Monetary Fund (IMF).

Industrialists viewed that the current hike in petroleum prices would add to the miseries of the ailing industrial sector. "The increase in POL prices will also hamper exports, as it will become difficult for exporters to compete in the world market due to high production costs," they feared.

They also apprehended that POL hike would have very negative impact on the purchasing power of general public, sale of goods would decline due to high prices which ultimately lead to closure of more industrial units.

Frequent increase in gas, power tariffs, transport fares and oil prices have already accelerated capital flight and discouraged local and foreign direct investment.

They rejected the increase in POL prices terming it unjust at the time when other countries in the region are extending price relief to their people.

Business leaders opined that increase in oil prices would negatively affect business activities by pushing input cost upwards and also squeeze consumers' purchasing power.

They said that both trade and industry of the country were already facing multiple challenges and were fighting for their survival in the wake of acute shortage of electricity and the recent increase in POL prices would add to their miseries.

According to them, foreign investors are moving towards other countries in the region due to rising cost of production in Pakistan and many textile industries have already shifted to Bangladesh.

"If the other countries in the region are providing relief to their consumers by reducing POL prices why Pakistan government is making people's lives miserable," they questioned.

They further said that as compared to India, Pakistan is producing 20 to 25 percent oil indigenously besides getting oil from Gulf States on subsidised rates while India does not have any of this advantage.

Increase in petroleum products will not only increase inflation and poverty but the outcome for trade and industry will also be not good.

They were of the view that developed world providing unexpected and unconditional relief packages to trade and industry to accelerate the pace of industrial activates but in Pakistan trade and industries are facing multiple hurdles such as power load shedding, extortion and harassment of ransom and international recession.

The textile industry has feared more rise in cost of doing business with the recent increase in prices of petroleum products. The value-added sector has called the POL hike stabbing in the back in a situation where the energy and cotton yarn prices have already pierced through the roof.

Leading textile industrialist Mian Faraz Alam said the transportation cost was already out of proportion due to the missing links in the infrastructure set-up of the country. "Cost of transporting from Karachi to Lahore is Rs 70,000 per container, i.e. 900 dollars, as against Rs 32,000 per container, i.e. 400 dollars for shipping from Karachi to Singapore," he said.

According to him, increase in oil prices amid high cotton season would have negative impact on the basic textile business. He said the government was increasing oil prices in a situation when the oil prices in the international market were declining.

According to Pakistan Sweater Exporters Association (PAKSEA) Chairman Adil Butt the value-added sector was already licking its wounds amid irrational increase in power, gas and cotton yarn prices in the country. "The increase in oil prices would prove fatal for the value-added sector," he added.

He said the regional competitors were facilitated by their respective governments, which are giving them rebates and tariff concessions. This is not the case with value-added sector in Pakistan.

The Lahore Chamber of Commerce and Industry (LCCI) President Zafar Iqbal Chaudhry slammed the Oil and Gas Regulatory Authority (Ogra) for increasing oil prices and asked the government to immediately withdraw increase in the prices of petroleum products.

According to him, seven-percent increase in the prices of petroleum products would badly hit both the industrial and agriculture sectors, besides jacking up the rate of inflation in the country.

The entire industrial sector was already facing multiple internal and external challenges and the recent increase would further worsen the economic situation.

He said the increase in petroleum prices would increase the input cost of agriculture production as high-speed diesel is used in tractors, tube wells, harvesters, thrashers and other agriculture machinery.

The cost of thermal generation by private sector will go up and not only the transportation cost of goods would multiply but fares of public transport would also increase manifold.

The Pakistan Industrial and Traders Associations Front (PIAF) Chairman Irfan Qaiser Shaikh termed increase in POL prices as an anti-trade, anti-industry, and anti-people decision.

According to him, the increase in oil prices would not only leave negative impact on the business activity but would also put the commoners under trouble who are already facing sever economic pressure due to inflation.