Business community resents oil price hike’s proposal

KARACHI: Business community on Friday resented a proposal of a sharp increase in prices of petroleum products, saying the decision would cause spike in cost of doing business contrary to the present government’s tall claims of relief for people and industries.

The business community widely condemned oil price hike decision, which they said would increase cost of doing business and add to the miseries of masses. The Economic Coordination Committee of the cabinet on Friday approved increase in prices of petroleum products, awaiting the federal cabinet’s nod on the decision.

Karachi Chamber of Commerce and Industry (KCCI) President Junaid Ismail Makda said oil price hike would further increase the cost of doing business.

“They (government) increases fuel prices as international prices of oil are higher but the relief is not passed on when the global prices decline,” Makda said. “This is not a good policy and people cannot sacrifice anymore. Such measures will lead to public agitation.”

KCCI president said currency devaluation and successive rounds of fuel price increases are quite contrary to the government’s narrative of improving ease of doing business. Rupee has lost 35 percent of its value against the dollar since December 2017, while international oil prices are also ratcheting up.

The government last month raised prices of petroleum products by seven percent month-on-month.

Though it simultaneously slashed sales tax on petroleum products, the price hike was termed as petrol bomb on people already suffering from five years high inflation.

The latest decision to increase oil prices coincided with reduction in sales tax on petro by five percent that would cause an estimated five billion rupees in revenue losses to the cash-strapped government.

Khurram Schehzad, chief commercial officer at JS Global Capital said oil price rise would increase transportation costs and squeeze margins of businesses.

“It would also dent sales of oil marketing companies, as such exorbitant increase would also press consumption,” Schehzad said. “Rising cost of doing business would limit business expansion and result in further layoffs across the industry.”

Mazhar Ali Nasir, adviser to president of the Federation of Pakistan Chambers of Commerce and Industry agreed the immediate spillover would be on transportation costs and “if prices of other fuels are also increased, there would be a serious dent on the government’s narrative of export enhancement and import substitution”.

Nasir further said the International Monetary Fund advised a 25 percent increase in electricity prices net of line losses, which would actually be approximately 40 percent increase.

“Businesses are not cost-effective anymore and if such measures are implemented there would be no investment in the industrial sector,” he added. “Investor sentiment is already shaken due to the inconsistency of polices. There has been no investment in the industry and if locals are reluctant, how can we expect foreigners to come and invest.”

Pakistan Apparel Forum Chairman Zubair Motiwala said growing cost of doing business would leave exporters uncompetitive in the international market.

“I do not understand whatever the government is planning to do,” Motiwala said. “They (government) talk about ease of doing business and then there is currency devaluation and fuel price hike.”

Ahsan Mehanti, chief executive of Arif Habib Commodities termed the oil price hike as bad news for the market. “Inflation would be triggered and there could be further increase in the policy rates.”