Rise in petroleum prices

Easy as it is to fault the caretaker government for increasing petroleum prices for the second time in a month, there is plenty of blame to go around. The caretaker government’s policymaking power is strictly limited and in approving the decision, it was acting in line with the recommendations of the Oil and Gas Regulatory Authority. Much of the blame should instead be directed at the previous government, which wanted to avoid taking the painful political decision to increase prices during its last few months in power. The increasing international price of oil coupled with the devaluation of the rupee had made importing oil more expensive than ever. Now, instead of a gradual increase, there has been a sudden hike of Rs7.54 in the price per litre of petrol, Rs14 per litre for diesel and Rs3.36 for kerosene oil. The price increase is an indictment of the economic management of the previous government. Our foreign exchange reserves are less than $10 billion as most of the reserves are spent on debt-servicing. The PML-N government’s plan was to borrow a lot of money from foreign institutions and governments to initiate infrastructure projects which would then generate revenue through increased exports. That has not yet come to pass, leaving the state scrambling to devise ways to bridge the fiscal deficit.

An argument can still be made that the increase in petroleum prices is unjustified. Removing subsidies on essential goods disproportionately hits the poor. But this too is a result of the previous government’s policy and performance. It spent its four years in power taking dictation from the IMF and increasing indirect taxes, and removing subsidies. This was done because it did not have the appetite to collect taxes from the wealthy and influential. The PPP has called on the caretaker government to withdraw this most recent increase while the Supreme Court held hearings regarding the previous price hike where it expressed its displeasure and called for plans to be drawn up to reduce petroleum prices. What is needed, however, is not an ad hoc solution but for the next elected government to set a comprehensive policy on subsidies and taxation. We need to decide if we as a nation want to continue balancing the books by making the poor and the middle class pay more or if we will finally get serious about ensuring that the rich pay their fair share of taxes.