IMPACT OF OIL PRICES ON COST OF LIVING
TARIQ AHMED SAEEDI
Apr 11 - 17, 2011
Every time when fiscal targets seem to be missed, the government repeats the act of counterbalancing by pushing up prices of petroleum products. The practice has been in vogue ever since this government came into power. The impact of price hike is immediately felt across the board and prices of goods and services start moving in the upward direction.
A recent rise in prices of diesel, petrol, kerosene, CNG, and LPG starts showing its affects over the prices of consumer goods and cost of production. While cost of transportation has increased, essential goods are going beyond the reach of common persons. Saving rate is already inconsiderable in Pakistan with average households spending most of monthly income on purchase of food items. Poverty is increasing and malnourishments are on the rise because of public food intakes less than the requirements to stay healthy and well and kicking.
The government is certainly not ignorant to the fact. However, it is averse to take alternative routes to reduce the fiscal gap as they are tricky and might strong reaction from powerful lobbies. Defence budget cannot be reduced. The first half of this fiscal year was not either good for the economy as total generated revenue of Rs989 billion was far less than the expenditures of Rs1,480, bringing the fiscal deficit to 2.9 per cent of gross domestic product (GDP) in six months.
Tax evasion is a main reason why tax collection remains insufficient to meet the development expenditures. If funds are redirected for example from non-development expenditures, resource constraints can also be removed. Correction of faults in the tax system can also be beneficial. Fiscal autonomy to the provinces under the 18th amendment is said to improve fiscal operation nationwide. Lack of skills in handling new fiscal responsibility devolved from the central-run Federal Bureau of Revenue (FBR) is considered a shortcoming of the provinces. This can however be dealt with the capacity building of staff of excise and taxation by FBR's officials.
The speed and eagerness the government shows in imposing indirect taxes are not seen in taxing rich. Expanding tax base to wealthy people would widen fiscal space. However, tax evaders should be gripped first to encourage taxpaying environment. At least, taxpayer-friendly environment can be created to build up healthy and sustainable tax system, which is still alien to the genuine taxpayers despite introduction of online taxation.
The government is seeking cooperation of parliamentarians to introduce economic reforms which ruling party believe are necessary to get the economy out of the problems. Prime Minister has the firm belief that the economy has reached to the point where alone reforms would rescue it. With a slight exposure to the situation the country is passing through nowadays, every person supports the concept of reforms. But, how the reforms will take place or from where implementation starts is the question.
Three-years have passed and people have given up hopes for betterment from the government that emerged on heavy public mandate three years ago with claims of austerity measures to heal up wounds on the economy.
The impact of high-energy prices is clearly seen in the agriculture sector emboldening the likelihood of food price spike. If prices of agriculture produces undergo yet another spike, people's buying capacity would go powerless leading to rise in poverty incidence as a result in areas facing food undersupplies. The recent hike in prices of petroleum products is likely to unleash powerful affects on the sector that employs over 45 per cent of workforce in the country. The sector has to bear an additional Rs30 billion cost due to rise in diesel price, observes chairman agriforum Pakistan, Tahir Gujar. Cost of production is already high and latest increase in prices of diesel would add this cost by another Rs30 billion, INP reported him as saying. He said there were 0.85 million diesel-run tractors and 0.91 million tube wells operating countrywide. It is obvious when operational costs of machines increase, the consequence would be high prices of crops. In next few days, domestic prices of wheat flour, rice, sugar, and other food items will increase further, he feared.
Despite people-unfriendly rise in prices of petroleum products, the government is still trying to convince people that there is a need of more push in prices of petroleum products because of high oil price in the international market and government's inability to afford subsidies on petroleum products. To counterbalance external impact over consumers, it has to afford fiscal corrosive subsidies, defends the government. According to the government officials, the subsidies run into billions of rupees every month. How the government would justify the subsidies given to the loss making public sector enterprises? Pakistan steel, Pepco, Pakistan Railways, and PIA eat billions of rupees of exchequers every month. According to the media reports, the subsidies given to these fattish organizations are more than budgetary allocation to the education sector. A senator supports the subsidy to the railways on the ground that it is an inter-city transportation means for the masses, citing as an example Indian railways that was fed by the state's funds for the same reason for over a decade. Will such financial assistance to Pakistan Railways reflect in the services? Let alone good service, commuters have to cough up exorbitant fares for travelling within the country on rails.
Corruption is the root cause of poverty and unemployment in the country. Salaries apart, unchecked outflow of exchequers' funds on trips and extravaganzas of the government functionaries can at least be brought to a halt. Fading economic figures should reflect in the appearance of the government departments as well as people at the helm of affairs. Pricey costumes, lavish lives, and happy-go-lucky expressions of public figures or spin-doctors are absolutely at odds with the people's woes. That public is considered a dunce for cronies in or out of the ruling junta to take a ride on makes all words practically fruitless.