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Finance minister says big decisions will have to be taken to get country out of economic crisis: Petrol, diesel prices hiked by whopping Rs35 a litre

Ishaq Dar says country needs to get rid of reliance on foreign aid

By Jawwad Rizvi & Khalid Mustafa & Mehtab Haider & News Desk
January 30, 2023
An undated image of Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar. — AFP/File
An undated image of Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar. — AFP/File

ISLAMABAD: Just ahead of the upcoming visit of the International Monetary Fund (IMF) review mission to Pakistan from tomorrow (Tuesday), the government on Sunday jacked up petrol and diesel prices by Rs35 per liter while prices of kerosene and light diesel went up by Rs18 per liter with immediate effect.

After witnessing devaluation of rupee against dollar, the government announced a massive hike in petroleum products’ prices which might help Islamabad to break the deadlock in upcoming parleys with the IMF and pave the way for the revival of the Fund programme.

It is roughly estimated that the government will pocket an additional Rs4.5 billion in three days as it had to announce the increase on February 1. The government is of the view that the prices were increased immediately to end artificial shortage of the petroleum products.

However, independent economists suggest that the hike in POL prices and devaluation will result in jump in inflationary pressures which might cross the 30 percent mark on account of CPI-based inflation in the coming month. The government has increased the Petroleum Development Levy (PDL) by Rs5 per litre on High-Speed Diesel (HSD) so the PDL now stood at Rs40 per litre. There is still Rs10 per litre space available to the government which will be increased in the coming weeks and months in order to jack up the PDL up to Rs50 per litre. Now the price of MS Petrol stood at Rs249.80 per litre in the domestic market after increasing the price by Rs35 per liter. The price of HSD escalated to Rs262.80 per litre against the earlier price of Rs227.80.

In a hurriedly done televised broadcast, Minister for Finance Ishaq Dar appeared just five minutes ahead of 11 am and stated that there were speculations spreading on social media about hike in petroleum products’ prices in the range of Rs47 to Rs85 per litre which resulted into creating artificial shortages of the products. He said that reports were received from different parts of the country about artificial shortages due to the non-selling/ hoarding of the products. He said that despite the recent devaluation of the rupee against dollar and surge of 11 percent in prices of the international market the government passed on a minimum price increase in petroleum products’ prices to the masses. Now, this new price will come into force from 11 am on Sunday, January 29, he added. He said that the government did not hike the petroleum products’ prices in last four months rather the prices of diesel were reduced by Rs19 to Rs20 per litre while prices of kerosene and light diesel prices were slashed down by Rs29 and Rs30 per litre respectively.

“We are optimistic that the immediate action taken on the recommendation of Ogra will help to overcome artificial shortages and hoardings in the country,” he said and added that all petroleum products were sufficiently available and there were no reasons for any shortages.

According to officials working for fixing the price of petrol, the ex-refinery price increased from Rs157.88 per litre to Rs177.47 per litre. The Inland Freight Equalisation Margin (IFEM) on petrol decreased from Rs6.08 per litre to Rs9.33 per litre. The distribution margin is kept unchanged at Rs6 per litre. The dealer margin kept unchanged at Rs7 per litre. The petroleum levy on petrol also remained unchanged at Rs50 per litre. So the ex-depot price of MS petrol is fixed at Rs249.80 per litre with effect from January 29.

On diesel, the ex-refinery price has been increased from Rs184.01 to Rs221.50 per litre. The IFEM jacked up from Rs3.21 to Rs10.70 per litre with effect from January 29. The distribution margin and dealer margin were kept unchanged at Rs5 per litre. The petroleum levy has been increased from Rs35 to Rs40 per litre. The diesel price is fixed at Rs262.80 per liter. In percentage terms, the petrol price surged by 16.3 percent to Rs249.80 per litre from Rs214.80 per litre, and diesel up by 15.4 percent to Rs262.80 from Rs227.80 per litre.

“The government, instead of enforcing the writ of the law against the petrol pumps which were indulged in hoarding the petroleum products for windfall profits, announced the surge in prices three days before February 1 and ensured huge profits to the petrol pump owners. This clearly shows the governance breakdown,” the consumers at the petroleum pumps in the twin cities of Islamabad and Rawalpindi told The News.

They argued that with the massive increase in petrol and diesel price, the transportation cost of goods and commodities would cause the further hike in the inflation.

Under the IMF conditions agreed in the PTI era, the government was collect non-tax revenue of Rs850 just through the imposition of the petroleum levy on the products.

Meanwhile, Lahore Chamber of Commerce and Industry (LCCI) rejected increase in the petroleum products’ prices and termed the increase will give another big push to already high inflation in the country. LCCI President Kashif Anwar reacting on the new petroleum prices, termed it a petrol bomb on the public and already destroyed economy. The government first accepted the International Monetary Fund (IMF) condition of increasing the interest rate and hike it to 17 percent, then devalued the currency against the US dollar and now hit the public and businesses with a whooping increase of Rs35 per liter in petrol and diesel prices, he said.

The LCCI, he said, believed that the all these measures taken by the government will increase the cost of doing businesses which are already very high in the region and forced the businesses and industry to close it and lay off workers. He saw a new wave of unemployment due to the recent economic steps taken by the government to fulfil the IMF condition to continue the loan programme. He asked the government to take immediate measures to manage the liquidation crisis.

Meanwhile, the transporters were also readying to increase the transport fare after the recent hike in the petroleum rates. An official of the goods transport association said that the members have discussed the issue of increase in the fare on phone and groups. However, the final decision was likely to be made in a day or two. It is expected that goods transport freight will increase almost by 20 to 30 percent and public transport fare would also be increased accordingly.

He further said that increase in petroleum products was not limited to petrol or diesel only, it would also push the prices of mobile oils, spare parts which increased the maintenance cost of the vehicles. Thus, there was no other option left but increasing the freight and fare, he added.

The goods transporters said that the government was not looking towards the public problems while just fulfilling the IMF conditions. Recent increase in the freight rates would be passed on to the end consumer.

All Pakistan Goods Transport Association General Secretary Nabeel Mehmood said that at least 15 to20 percent increase was on the cards. ‘We have discussed the matter and a national meeting is called today (Monday) for reviewing the situation and take decision collectively,” he said, adding that good transport business is already adversely affected with the non-clearance of good containers from Karachi ports. Currently, 40 to 45 percent of cargo vehicles are operational while the rest have been parked by owners. Presently, cargo truck freight from Karachi to Lahore is Rs150,000 to Rs160,000 which will increase to Rs190,000 to Rs200,000. Similarly, Lahore-Karachi fright is Rs80,000 to Rs85,000 which will increase to Rs100,000-110,000.

Cargo Freight of Lahore-Rawalpindi route is Rs60,000 will increase to Rs80,000 and Lahore-Peshawar is Rs70,000-75,000 will increase to Rs90,000-95,000.

Nabeel mentioned that one can imagine the downwards cargo business with it that earlier daily 1500-2000 trucks moved from Lahore circular road in night which now reduced to 500 only.

Meanwhile, addressing concluding session of two-day Bacha Khan Conference in Islamabad, Finance Minister Dar said that fiscal discipline was inevitable for prosperity of the country and only then democracy can be stabilised.

He said that we would have to take big decisions to drive the country out of economic crisis.

He said we have to get rid of reliance on foreign aid. He said late Bacha Khan had also promoted the concept of utilising domestic sources instead of the imported ones.

Dar said we must learn to uphold the dignity of our country in the comity of nations. He urged all political forces to join hands to steer the county out of current economic crisis.