Apr 11 - 17, 2011

In the wake of surge in oil prices in the international market, the PPP-led government has increased the prices of domestic oil products by up to 13-percent with effect from 1st April, 2011.

Although the government claims that the increase was in line with the trend in global prices, the move is likely to be heavily criticized all over the country. However, the political parties that showed unity on previous hike in petroleum prices to force the government to withdraw the oil increase are relying this time on mere statements. The real sufferers are salaried class, wage earners, and poor strata of society.

As per increase made in petroleum prices, the price of high speed diesel (HSD) was increased by Rs10.67 per litre or 13 percent, petrol by Rs6.98 per litre or 9.1 percent, HOBC by Rs7.16 per litre or 7.9 percent, and kerosene oil and light diesel oil each by 13 percent or Rs9.65 per litre and Rs9.07 per litre respectively. With this new increase, the prices of petroleum products will now stand at HSD Rs92.89 per litre, kerosene oil Rs84.10 per litre, LDO Rs78.98 per litre and petrol Rs83.56 per litre.

Official circles believe that the government had provided Rs35 billion as subsidy on petroleum products during the last five months, and the government has also to absorb a loss of Rs10 billion during April 2011 despite the current increase in oil prices.

The surge in domestic oil prices from April 1, 2011 announced by the government is the biggest since July 2008 and would of course have serious consequences for the economy and the life of ordinary people of the country.

Economists are of the view that the increase in oil prices would slow down industrial activity and hit the economy's growth prospects, leading to further unemployment and poverty in the country. Prices of all commodities and services in the domestic market will also increase in almost direct proportion to the rise in the prices of PoL products. All these negative developments are bound to increase the deprivation of common man and likely to be very painful, especially at a time when the growth rate is already stagnant, unemployment and poverty are rampant and inflation is in double-digit.

According to them, the government could have opted for a lower increase in oil prices if some fiscal space was made available by curtailing unnecessary expenditures, but, unfortunately, developments during the current year have been highly unfavourable on this front.

They maintained that expenditures are mounting due to extremely volatile security situation and increasing debt servicing. The problem of circular debt and increasing losses in PSEs is still unresolved.

On the other hand, industrialists and businesspersons have criticized current hike in petroleum prices and said that oil is the lifeline of transport and increase in its prices will raise the cost of doing business. This hike will further increase inflation, which is already in double digit, they said, adding, increase in oil prices will inflict this heavy blow on industrial sector at a time when the country was facing a very high inflation rate, especially in food items.

They said that the government has forgotten the poor and added that such an unprecedented hike will put an additional burden over the people who are already facing hardships due to skyrocketing prices of the essential commodities. They further said that the industrial workers have already started demanding increase in salary and now after this hike in oil prices, they will further press the industrial units to increase salaries.

They said that drastic increase in oil prices will have devastating impact on all sectors including transport, industry process, agriculture sector and imported and export of goods etc. They said that increase in oil prices would have severe impact on cost of doing business and cost of transportation.

They said that the industry has already been facing a number of challenges including poor law and order. Now the increase in petroleum prices would be the "last straw on the back of camel."