The tariff of graft

LAHORE: Increase in petroleum products rates, gas/power tariffs, and declining rupee value are a kind of consistent non-budget taxes, burdening consumers all around the year and giving rent-seekers more opportunities to add to their fortunes.

Of the above four the state does not have any control over the petroleum rates as we have to import most of our needs. Recently we have also started injecting expensive imported gas in our pipelines to offset the domestic shortage of this commodity.

There is however no justification in constantly increasing the power tariff to cover the inefficiencies (theft) in the power management. The increase is in fact a greater benefit for those that facilitate this theft. Every time tariff increases, rent-seekers monthly rates also go up. Their income and lifestyle corrupt other honest officials. This is the reason why power theft, despite myriad attempts to reduce it, continues to increase.

Past governments were blamed for this incompetence, but the present regime has also not improved the situation. In fact, the theft has increased.

The abnormally high power tariff is the most unfair burden on the consumers.

As far as rupee value is concerned each government in power manipulates it according to the whims of the concerned circles. Rupee would remain unstable till our exports match our imports or are somewhere near.

Despite huge curtailment of imports our exports still cover only 50 percent of our import bill.

The rest comes from remittances (entire remittances of overseas Pakistani workers is consumed to cover the import bill. The gap left after that is filled through both commercial and concessional borrowing. We also have to borrow dollars to service our foreign loans.

We encouraged foreign investments in the past that produced products for the domestic market only (no exports). These investors take back their profits in foreign exchange. Since they do not export their products they also do not earn any foreign exchange. Many investors have repatriated more foreign exchange in the last 20 years than the amount they invested in our country. And repatriation of profits continues.

In order to stop future bleeding of foreign exchange the government must allow that foreign investment where the sponsors guarantee that at least 15 percent of their production would be exported.

That 15 percent would cover the profit that investors repatriate yearly.

In case the sponsors failed to export then they should not be allowed to send their profits to their home countries.

Moreover, the trend of providing sovereign guaranteed rate of return on investment through sovereign guarantees must be constitutionally banned. All efforts must be made to increase exports.

This should be done by reducing the cost of doing business and removing unnecessary irritants faced by the exports from the bureaucracy. The criminal act of impounding containers with export consignment to control mobs/protestors should be made a punishable offence.

The price hikes that come through these non-budgetary measures adversely impact the lives of all citizens particularly the poorer segments of society. In recent years’, the incomes of the families have either remained stagnant or declined but the price hike triggered all around due to these measures has devastated their budgets.

Federal government has not announced any increase in the minimum wage for the last two years. More than 80 percent of the workers are employed at much lower than the minimum wage. This speaks volumes about the absence of government writ.

According to the Federation of Pakistan Chambers of Commerce and Industry about 60 percent of the small and medium enterprises have succumbed to the inflationary pressures. Most of the poor are employed by SMEs. Many have been shown the door because of the inability of SMEs to operate.

The increase in utility rates and petrol prices becomes unbearable for the poor that according to most economists spend 80 percent or more of their income on food particularly after four years of hyper food inflation in Pakistan. After more than 30 months of stagnant minimum wage and ever-increasing prices during this period the families earning even Rs17,000-18,000 per month are living below the poverty line.

The increase in prices of petroleum products include sales tax, petroleum levy, electricity tariff includes electricity duties, and sales tax. Similarly, gas tariff includes sales tax and other taxes.

All these taxes have got nothing to do with the cost of these commodities.

They go into the government kitty which means that the poorest of the poor are contributing towards government revenue. This revenue is easy to generate but the state is extremely soft on direct taxes. It avoids confronting the few million influential people whose luxurious lifestyle says it all.

Poor consumers are being subjected to not only indirect taxes on consumption of power and gas but also bear the burden of corruption in their distribution. The corruption by some counts is higher than the actual tariff.