Record high petroleum prices put economy on slippery track

KARACHI: The business community on Saturday had divergent views on the latest increase in the prices of petroleum products. Some termed it a “bitter pill” that the government had to swallow while others dubbed it as a “disaster step” to burden the industry.

Mian Nasser Hyatt Magoo, president Federation of Pakistan Chambers of Commerce & Industry (FPCCI) believed that the government made the latest increase in the prices of the petroleum products “out of compulsion” as it had no other option but to increase the prices owing to a surge in prices in the intentional market.

On the other hand, Karachi Chamber of Commerce & Industry (KCCI) expressed sheer dismay over the exorbitant increase in the prices of petroleum products and appealed to the government for action to save the people and the industry from the impact of high fuel prices.

The stance of KCCI was also endorsed by North Karachi Association of Trade & Industry, which feared that the latest rise in the petroleum prices would not just push up the inflation but would prove to be disastrous for the country’s exports by rendering them uncompetitive in the international market.

The federal government on Saturday raised the price of petrol by Rs10.49/litre and that of high speed diesel (HSD) by Rs12.44/litre. The new price of petrol for two weeks, effective from Octocber 16 is Rs137.79/litre while high speed diesel will sell for Rs134.48/litre.

Talking to The News, FPCCI president questioned the options that the government was left with in the face of soaring crude prices in the international market.

“Though the cost of manufacturing would increase it would not add up to the cost of Pakistani industry as high fuel prices are impacting the industry around the globe,” Magoo opined.

He said the government fixed electricity tariff for the export-oriented industry and that’s helping it. "However, gas and coal prices are impacting not only Pakistan but the entire world."

He didn’t see any adverse impact on the local export sector as "energy crisis in China is impacting export sector there and orders may be diverted to Pakistan".

On the other hand, chairman Businessmen Group (BMG) & former president Karachi Chamber of Commerce & Industry (KCCI) Zubair Motiwala says the increase in petroleum prices not only affecting the overall economic performance but it would also intensify the hardships for businesses and the masses who were already overburdened because of high inflation.

“The current government has always desired that the cost of doing business is reduced but all these steps are in contrast to the policy of the government as the nation nowadays suffers badly due to frequent hikes in petroleum prices, electricity and gas tariffs and other utilities in addition to fluctuating exchange rates and higher duties on imports,” Motiwala said.

He pointed out that it was a matter of grave concern that gas supply to CNG stations in Karachi has been suspended for 10 consecutive days even though the winter season has not yet arrived, and this, he said, was really worrisome. “We are well-aware that the international oil prices were on the higher side, but the impact must not be passed on to the public as has been done in the past," Motiwala said.

"The petrol and diesel prices in Pakistan peaked at Rs87 and Rs65 per liter during the historically highest ever international crude price of $147.27 per barrel in July 2008 and now when it was around $85, the petroleum prices have been raised to a whopping Rs137.79/liter which was beyond our understanding.”

Faisal Moeez Khan, president North Karachi Association of Trade & Industry decried the latest increase in the prices of petroleum prices and expressed the fear that high cost of manufacturing would export products incompetitive in international market.

Khan pointed out that industry’s cost of manufacturing has gone up by 15-20 percent in the last one year and gas shortage has further added to the woes of local industry.

He said that export orders are booked for one year. “The export orders booked on the basis of six month back cost would not be feasible to be met by manufacturing the products on the latest cost of inputs and raw materials,” Khan added.