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June 28, 2020

Oil price decision draws nationwide condemnation

Business

June 28, 2020

KARACHI: Government’s ill-advised decision of an exceptional increase in oil prices is expected to unleash inflation furry over people who have already been crippled by the corona shutdown, businessmen and analysts said on Saturday.

President All Pakistan Organization of Small Traders and Cottage Industries Karachi Mahmood Hamid criticised the record hike in fuel prices, saying it would result in increased inflation, and further weaken people’s buying power.

“Thousands of traders had gone bankrupt due to the pandemic-related lockdown and the government should only think of small traders and people in such circumstances,” said Mahmood. “The economy is already in distress. Such ruthless increase in the price of fuel would only aggravate the situation. Government is only concerned with increasing its own revenues, with no focus on providing relief to the people.” On Friday, government increased the prices of all petroleum products by up to 33 percent, which drew nationwide condemnation and fears of a new wave of inflated rates of all commodities. The decision came as a surprise as the prices revised last month were to remain effective till June 30.

Informed sources said oil marketing companies were reluctant to keep oil supply at the lower prices. The government had to cave in to the pressure, they said.

Industrialist Ikhtyar Baig said reduction in fuel prices in previous months was too an administrative failure, as the government couldn’t restrict hoarding of fuel by oil marketing companies.

“Now, this sudden and massive jump in fuel prices would be disastrous. Government should have increased fuel rates in installments,” said Baig. “The previous three-month average oil prices are $30/barrel, but the government calculates new fuel prices on the basis of current oil prices prevailing at $40/bbl, which is an injustice.”

Sheikh Umer Rehan, president of Korangi Association of Trade and Industry said relief initiatives were expected from the government, “but, the situation is opposite”.

“This would unleash a new wave of commodities’ price hike, and the government does not have the capacity to cope up with the fallback of this decision,” Rehan said.

SM Muneer, chairman of Din Group of Industries condemned historic hike in petroleum prices and termed the decision of federal government as a major setback to industry and common people.

“People never get the benefit of oil price decline announced earlier this month, but this massive price hike would prove to be disastrous for the masses,” Muneer said.

Khurram Shehzad, chief executive officer of Alpha Beta Core said tax on fuel was Rs32/litre in February, which is now Rs25/litre.

“Government needs to create a balance in this challenging economic scenario. It would have been better if this Rs13/litre was given back to support industries,” said Shehzad. “If the authorities keep a check on price levels, inflation should not go up because it did not come down much when the decline in petroleum prices was passed on.”

Arsalan Soomro, managing director of KASB Securities said last month reduction in fuel prices was a relief for consumers, but a disaster for oil marketing companies and refineries.

“Perhaps oil storage was dwindling and new cargoes wouldn’t have been unloaded till July 1st to reflect current market price and avoid public/media hue and cry,” Soomro said. “Fuel price hike would push inflation beyond 8 percent next month. However, there would be no interest rate hike for a couple of months for sure.”