9.9 per cent oil price stunner

This is the single biggest surge in oil prices in 32 months since July 2008 and is expected to generate about Rs5-6 billion revenue for the government, depending on the fluctuation in the international market. - File Photo ISLAMABAD: Ending a four-month freeze forced on to it by the opposition of the major parties, the government on Monday increased by 9.9 per cent the prices of all petroleum products in a bid to pass on the partial impact of the steep rise of international oil prices. The political explosion that this hike may cause remains to be seen. This is the single biggest surge in oil prices in 32 months since July 2008 and is expected to generate about Rs5-6 billion revenue for the government, depending on the fluctuation in the international market which has been caused by the political turmoil in oil-producing countries of the Middle East and North Africa. In fact, the recent instability in the Middle East, which does not appear to be settling down any time soon, has led to a recent hike in oil prices. The decision was taken at a meeting presided over by Prime Minister Yousuf Raza Gilani — who at present is holding the petroleum portfolio. The meeting was also attended by Finance Minister Dr Abdul Hafeez Shaikh and secretaries of finance and petroleum. Though the decision was immediately condemned by Pakistan Muslim League-N and Muttahida Qaumi Movement (MQM), both the parties said that the final decision in this regard would be taken by their top leaderships. This cautious criticism is noteworthy because the last time the government increased the prices, the MQM quit the treasury benches in the National Assembly in a huff while the PML-N ended by giving a 45-day ultimatum to the government to mend its ways. And the 10-point agenda the PML-N provided to guide the government began with the demand to take back the increase in oil prices the government had just announced. Gilani did just that to assure the PML-N that the PPP government was sincere in its intentions to implement the agenda. However, now it seems as if all the parties are back at the same crossroads. Yet, all sides know that the hike is inevitable if the economy is to avoid a meltdown. Perhaps this is why the immediate reaction has been a little muted. Khwaja Mansoor Sohail, an MQM member of parliament who is also a member of the parliamentary committee on oil prices, told Dawn that the parliamentary parties had not been consulted by the prime minister before the price increase. He said the MQM had opposed the petroleum price hike before and would oppose it now. He said the 10 per cent hike would have an impact of over 15 per cent on prices in general. He said it was ironic that the government was providing over Rs200 billion in subsidies to landlords but was shying away from subsidising petroleum prices. The government should impose agricultural tax and stop smuggling instead, he added. He said the MQM Rabita Committee would take a final decision on the issue. PML-N spokesman Siddiqul Farooq told Dawn that it would be advisable for the government to not increase POL prices. He said the government should find other avenues to cope with the situation instead of burdening the people. He added that PML-N chief Nawaz Sharif had already advised the government to stop tax evasion of Rs600 billion and corruption in the FBR which would save about Rs500 billion. Mr Farooq lamented that the government had failed so far to evolve a strategy, despite commitments, to revise POL, gas and electricity prices in consultation with parliamentary parties. Officials said the government had absorbed a loss of Rs13 billion on account of petroleum levy from October 2010 till Feb 28 and that the government would lose another Rs5 billion during March even after the 9.9 per cent increase. The official notification issued on Monday announced that the prices of petrol were to be pushed up by Rs7.23 per litre (from Rs72.96 to Rs80.19), while High Octane Blending Component (HOBC) prices by Rs8.58 per litre (from Rs86.67 to Rs95.29). Both these increments are 9.9 per cent each. Similarly, the ex-depot sale price of kerosene has been increased by Rs7 per litre (from Rs70.95 to Rs77.95) while the price of light diesel oil (LDO) has been jacked up Rs6.60 per litre (from Rs66.61 to Rs73.21). These are also increments of 9.9 per cent. The high speed diesel (HSD) prices have been increased by Rs7.76 per litre (from Rs78.33 to Rs86.09) or 9.9 per cent. The government has also increased its share through petroleum levy. Besides the 17 per cent General Sales Tax, the government will charge Rs6.25 per litre on petrol, Rs9.80 on HOBC, Rs3.75 on HSD and 25 paisa per litre on kerosene. As a result, GST collection would increase by Rs1 to 1.35 per litre. Ogra spokesman Syed Jawad Naseem, who announced the price revision, said the international prices of kerosene and high speed diesel had increased by 25.8 and 24.8 per cent respectively while those of petrol and furnace oil had gone up by 27.3 and 23.4 per cent respectively since Nov 1 last year. The increase in petroleum prices is expected to multiply inflation and the cost of industrial production. Following is the comparison of per litre old and new petroleum prices in rupees: