Petrol price smashes records after Rs 137 jump, HSD rises 55% to Rs 520 per litre, Petroleum tax hits record
As the city runs on fumes, motorcyclists are queuing up at a petrol pump in Karachi, waiting for their turn amid the hike in fuel prices. Photo: Jalal Qureshi / Express
ISLAMABAD:
The government on Thursday further hiked petrol prices by Rs137 per litre, or by 43%, to an all-time high of Rs458.4, after the Prime Minister decided to impose more charges on consumers.
The new price of Rs 458.4 per liter of petrol is also far higher than the increase in the international market when the Prime Minister decided to raise oil tax to a record Rs 160.61 per liter on petrol.
With the stroke of a pen, the Prime Minister raised the oil tax on petrol from 106 to 161 kroner per liter – an increase of 55 kroner in taxes.
The PML-N-led government also raised the high-speed diesel price to Pakistan’s highest level of Rs 520.35. per liter – an increase of Rs 185. per liters or 55%. But the prime minister scrapped the kerosene tax on high-speed diesel and decided to retain the Rs2.5 per liter carbon tax in addition to all import duties.
The government raised prices after failing to convince the International Monetary Fund (IMF) to allow it to provide more subsidies. The IMF capped the maximum subsidies for fuel at Rs 152 billion.
The failure to convince the IMF also underscores that Prime Minister Shehbaz remained unable to leverage his ties with US President Donald Trump to convince the IMF to let the country absorb the price shock.
It is also the failure of Finance Minister Muhammad Aurangzeb and his ministry who could not convince the IMF and did not meet the fiscal targets. Failure to meet tax targets ate up the extra fiscal space available in the budget.
But the most shocking action by the government was to increase the oil tax rate to Rs161 per liter on petrol to raise additional funds for cross-subsidizing diesel prices. The government outsourced the core function of the state to protect its citizens to the petrol consumers.
It was the second major hike in fuel prices in less than a month after Prime Minister Shehbaz hiked diesel and petrol prices by Rs 55 per liter or 20%. The cumulative increase in the price of petrol within a month is 63% and that of high-speed diesel 75%.
Petroleum Minister Ali Pervaiz Malik and Aurangzeb announced the new rates in a pre-recorded video statement. The Prime Minister could not face the people and unlike the last two times when he addressed the nation to tell them he was not raising prices, this time he sent the two federal ministers to deliver the message.
The oil minister said petrol prices in the past week rose further by 6.5% to $136.4 and high-speed diesel by 20% to $285 in the international market. He announced the prices a day before the regular increase to avoid hoarding and runs to the gas stations.
The Express Pakinomist reported on Thursday that the government assured the IMF that it was ready to raise fuel prices. It was one of the worst negotiated deals at staff level, with the government pretending to the IMF that everything was normal with the economy despite the worst fuel crisis ever since 1973.
The political and bureaucratic failures will now hurt every household at a time when poverty in Pakistan is at an 11-year high, income inequality at a 27-year high and unemployment at a 21-year high.
Regional tensions escalated sharply after the US and Israeli attacks on Iran, killing thousands. In retaliation, Iran has closed the Strait of Hormuz.
The price of kerosene has been increased by Rs34 per liter to Rs468, while the price of light diesel has been increased by Rs30 to Rs395 per litre.
Global oil prices have risen massively amid the shutdown of some major oil and gas fields due to Iran’s decision to harm US interests in the region and close the Strait of Hormuz.
In June last year, the IMF had asked Pakistan to allocate around 390 billion. Rs. for emergency needs. The money was set aside for contingencies such as war and natural disasters, which the government did not use and instead placed a greater burden on users of petrol and high-speed diesel.
The government gave Rs129 billion in subsidies over the past three weeks by deducting salaries of employees and cutting the public sector development programme.
The cost of the war will be paid by the common consumers as the government functionaries and bureaucrats get a free transportation facility. Despite so-called austerity, the federal government recently bought new cars for its top bureaucrats.
The Prime Minister had announced austerity, but his ministers did not change their travel patterns. The ministers’ vehicles are still escorted by additional security vehicles even in the Red Zone, which is said to be the most protected area in Pakistan.
These ministers go to the Prime Minister’s house from their offices with their full escort.
The Federal Bureau of Revenue’s administration is also using heavy vehicles in violation of the transport policy, and the Punjab government has recently bent the policy for its top provincial bureaucrats.
