IN what is widely believed to be sheer overreaction, the Government dropped a fuel bomb on its people on Friday by jacking up prices of petrol and diesel by Rs.55 a litre in just one go citing possible supply constraints and rising prices of the commodity in the international market.
Under the new rates, petrol will cost Rs. 321.17 per liter, up from Rs. 266.17, while diesel will rise to Rs.335.86 per liter from Rs.280.86.This marks the first weekly review of fuel prices since regional tensions threatened major global energy flows following the closure of the Strait of Hormuz by Iran in retaliation to the invasion of the country by the United States and Israel. Previously, the federal government had adjusted petroleum prices on a fortnightly basis and weekly adjustment means further erosion of price stability in the country.
The region is passing through a dangerous war, which is expanding because of various factors, therefore, the Government has every justification to take measures to safeguard economic interests of the country but its move to hike the prices massively within a few days of the war smacks of insensitivity towards the plight of the people. The most shocking aspect of the entire episode is that the Government, oil marketing companies and petrol pumps will earn windfall profit on existing stocks, which were purchased at much less rates. There was absolutely no justification for such an increase when the Government itself was claiming that the country has enough oil reserves for a month. The Ministers, who announced the excessive increase in the prices of petroleum products, claimed the Government’s approach was based on preparedness and not panic but the manner and quantum of the increase contradicts this claim. Acting prudently, the Government is taking necessary measures to prevent a disruption in supplies and two vessels are on their way to Pakistan carrying oil for the country. However, passage of the price impact before it is actually felt by the country was not a measure expected of an elected Government. Even if the impact was to be passed on, then it should have been based on actual cost and not its multiplication as the announcement suggests. This is evident from the fact that as against the price impact of Rs.30 a litre, the Government has increased the rate by Rs.55 per litre.
The strategy adopted by the Government has the potential to push the country back to the period of super-inflation as people witnessed at the time of assumption of power by the present Government. People had just taken a sigh of relief over the relative price stability but the extraordinary increase in the prices of oil products and possibility of similar increases in case of continuation of the Gulf crisis will trigger a new wave of price-hike. It is understood that increase in oil prices will also be reflected in the rates of electricity, fares and transportation of goods, pushing the cost of production and sale further high and that too at a time when there was a demand to bring it down. Apart from burdening its people in a non-transparent manner, the Government is also mulling several measures aimed at energy conservation but in fact such an approach only impacted on productivity and efficiency and did not contribute much in terms of saving fuel or electricity in the past. The plan envisages distance learning by educational institutions, early closure of markets and Friday holiday during Ramadan. Distance learning will not complement the objective of energy conservation in any significant way but will definitely play havoc with the educational career of students especially in times of annual examination. Similarly, work from home means further loss of efficiency in governmental offices. As for early closure of markets, this is just a slogan every government raised but miserably failed to implement due to non-cooperation of the powerful business community.
