Govt keeps POL prices unchanged for next fortnight

ISLAMABAD: Since the ouster of the former premier Imran Khan from the office, the Shehbaz Sharif-led government, for the second time, announced the decision to keep the petroleum prices unchanged at home from May 1 through May 15, 2022. PM’s cabinet members had also voiced concern over subsidising the well-off with this multi-billion amount each fortnight on POL.

On Saturday, the Finance Division announced that in the fortnight review of petroleum products' prices, the prime minister had rejected the proposal of OGRA for an increase in the prices of petroleum products and directed to maintain its prices at the current level, so as not to burden the consumers with the hike in prices. The current ex-depot price of petrol is Rs149.86 per litre, high-speed diesel Rs144.15 per litre, kerosene Rs125.56 per litre, and light diesel oil (LDO)118.31 per litre.

It may be noted that the government had also kept the prices unchanged for the fortnight (April 16-30). Later, the PM’s cabinet members voiced concern over this massive subsidy on petroleum products prices to the masses.

On February 28, 2022, former prime minister Imran Khan announced slashing of petroleum products’ prices by Rs10 per litre and electricity tariffs by Rs5 per unit as part of a series of measures to bring some relief to the public till end-June 2022.

The last time when Shehbaz Sharif-led government did not increase the POL prices, the next day (April 16), Miftah Ismail, Finance Minister, through his Twitter account, expressed the government’s inability to bear this enormous burden and announced that the government might have to retract its recent decision. He wrote, "The decision announced last night to continue petrol and diesel subsidies was tough and will have to be revisited.”

He had said that the "government was losing Rs21 per litre on petrol and Rs52 per litre on diesel." At this rate, he estimated that the government would lose Rs250 crore [Rs2.5 billion] per day or Rs3,600 crore [Rs36 billion] in two weeks, which is far more than the expense of running the entire civilian federal government plus the entire BISP/Ehsaas program.”

Despite that concern, the government again decided not to revise the prices. The International Monetary Fund (IMF) has also expressed its displeasure over these decisions. To keep the prices unchanged, Islamabad would spend Rs2.5 billion each day to keep Pakistanis away from the impacts of rising crude prices in the international market. Rs36 billion would be paid from the government’s kitty by not increasing the petroleum products during these 15 days. The Global Benchmark Brent price was at $106.08/barrel on Friday. Earlier, on March 7, it hit US$139.13 a barrel. The all-time of $147.50 was last seen in July 2008.

In Pakistan, petrol is being used primarily on cars and motorbikes. Diesel is used in the agriculture and transport sectors. Consumers in remote areas use Kerosene for cooking purposes where natural gas or Liquefied Petroleum Gas (LPG) is unavailable. LDO is being consumed by flour mills, a couple of power plants, and other industries.

It may be noted that currently, there is a shortage of diesel in the country. The agriculture sector faces its impact as the Kharif season has already started with major crops, including sugarcane, cotton, rice, and maize. The Kharif season begins on 1 April and ends in September. In this season, the demand for diesel significantly increases.

In the cotton belt, especially southern Punjab, the shortage affects the cotton sowing, which may ultimately affect its production and the textile sector. Soon after the decision, senior analyst Khurram Shehzad tweeted: “Petrol subsidy reaches Rs30/ltr vs Rs21/ltr. Diesel subsidy now at Rs73/ltr vs Rs 50/ltr." He suggested the government take urgent steps including targeted subsidy for masses, raising tax on 1300cc cars, reducing working days, closing markets at 7pm, sharing rides, banning V-8 engine vehicles and 4x4 veicles. He asked the government to sit down on this and consider it as priority.