Who increased the price of petrol?

Under any conventional situation of energy challenges, the economy usually pays against the uneven scenarios and provides relief to the consumers and other stakeholders for the sake of ensuring seamless energy operation. However, the recent turn of the situation in the country portrays this otherwise. Here, in the midst of COVID 19 pandemic, the government instead of soothing the woes of people has virtually seized this opportunity to make the energy consumers pay for the economic meltdown as well as dilapidated situation of fiscal deficit.

Taking the example of the price of petrol that has recently been accentuated to the tune of Rs.25.58, increasing the retail price to Rs. 100.11 per liter from the previous price of Rs74.52 according to a Finance Division press release. In the same wake, the price of high-speed diesel (HSD) has been increased to Rs. 101.46 per liter from the last price of Rs.80.15, an increase of Rs 21.31 per liter. While injecting this hike in the bodies of masses, the government tried to defend its stance before media through the supposed underneath reasons which according to national correspondent has compelled towards the inevitable raising of petroleum rates.

As part of government’s narrative, it was floated that the prices of petroleum products are still lowest in the region. To same extent this argument is correct, because in comparison to India, Sri Lanka, Nepal, Bhutan and Bangladesh the prices are still higher than Pakistan with the exception of Afghanistan in the region, where retail petrol price is still 0.44$ per liter in comparison to Pakistan’s 0.6$ per liter. However, as general note, the countries and their pricing systems vary in accordance with their distinct macro and micro economic bearing, purchasing power parity, tax and business environment, inflationary trends and other social and economic ground realities. Hence this argument on the whole does not hold water to compare petrol price of one country with other and create justification for the increase.

Another argument as put forth by the government is to defend its stance through citing the sudden steep rise in the benchmark price of petroleum products in the global markets i.e. Brent Crude, WTI, OPEC etc. Even though, was it so indispensable on the part of government in Pakistan to respond in such a hurried manner, so much so to reciprocate through 100% increase in the ex-refinery base rate of petrol; pushing the same from 23 to 46 Rupees per liter in a jiffy? If this was the necessary domino effect of the international price variation, then where is the significance of our experts who while failing to respond in favor of public relief are just reacting haplessly against the odd situation. They are definitely supposed to defend the government and public interest through the best of their expertise and resources instead of unleashing the customary response in the pretext of their detrimental logic.

In Pakistan, the hefty and hasty response in the local prices of petroleum products could have been averted or avoided at least for the considerable period instead of turning these knobs in favor of OMCs (Oil Marketing Companies), who remained happy beneficiary to the tune of billions which they earned in just weeks. In the coming days, this quantum jump in petroleum prices will take its full toll in the shape of corresponding increase in the electricity rates as well as other utility prices that will follow suit in due course. The risk of opening the floodgates of such high inflationary trends in an already charged environment speaks volumes about the questionable resourcefulness of the people sitting at the apex of energy management in the country.

The story of hike in the petrol prices in the country will be incomplete without understanding the snowball impact of taxes i.e. GST and Petroleum Levy. Needless to mention that GST at the start of 2019 was just Rs.8 per liters of petrol and was varying across different petroleum products. This has been increased to Rs. 15-16 across the board through June 26th notification. Further to this while adding insult to injury, the Petroleum Levy which also followed the same value as GST in the start of 2019 and was even Rs. 15 per liter in January 20, 2020 is now pushed to the level of Rs. 30 per liter, which is unprecedented increase in the history of same class of tax. This radical rise is understandable because the federal government will be its 100% beneficiary otherwise in the case of GST more than 56% share is taken by the provincial governments.

As the matter of fact, the petroleum levy presently stands as more than 65% of the ex-refinery rate of petrol and GST as 34% of the same. In nut shell, even though if we acknowledge the argument of the government that increase in the ex-refinery base rate was inevitable in the face of pressures from international market, the retail rate of petrol could still be controlled at previous level of Rs. 74 per liter as an undeniable fact, if we pull back the Petroleum Levey to its level of January 2020 i.e. Rs. 15 per Liter and GST to a level of January 2019.

In other words, the government has always this option in its sleeve to provide relief to masses at all cost in this daunting and draining situation of pandemic, where masses in general are vastly exposed to multitude of health and financial vulnerabilities. As purely a political decision, the government actually conformed its doctrine that fiscal deficit and its coverage carries more weightage in the eyes of government in contrast with public relief. This doctrine in the case of other countries e.g. Italy has been exercised in total reverse where the government preferred the survival of people even at the cost of national economy. However, the million dollars question that comes in the mind is; whether our Prime Minister was allowed his due prerogative to exercise his clear choice of feeding economic meltdown at the cost of tearing apart the pound of flesh from the skin of masses in the shape of GST and Petroleum Levy. If this choice has been mere impersonated in the name Prime Minister, then the point of concern is that who actually exercised this political decision which has caused the tarnishing of the image and credibility of the government?