ISLAMABAD: The major coalition partners in the federal government – PPP and MQM-P – Tuesday expressed their concern over the hike in petroleum prices.
On Monday night, the federal government announced a hike of Rs6.72 per litre in the price of petrol for the remaining days of August 2022, according to a notification issued by the Ministry of Finance.
Former president and Pakistan Peoples Party (PPP) Co-chairman Asif Ali Zardari voiced his concern over the increase in fuel prices despite downward trend in international market. Asif Ali Zardari, in his statement, said the PPP is an ally of the government, they are with the government but consultation should have been done before taking the decision to raise the fuel prices. “We all came into power to give relief to the masses and this should be our [coalition] top priority.”
The former president said he will soon meet Prime Minister Shehbaz Sharif and discuss the performance of the economic team.
Muttahida Qaumi Movement-Pakistan (MQM-P) also expressed its reservations over the hike in the petrol price.
MQM-P Rabita Committee said that the hike in petroleum prices will trigger inflation in the country. It said that it was beyond comprehension that why prices were raised despite a reduction in oil prices at the international level, adding that the government should have mercy on poor masses and give them some relief.
Pakistan Muslim League-Nawaz (PMLN) supremo Nawaz Sharif also opposed the government decision. Replying to a netizen, PMLN central vice president Maryam Nawaz wrote on Twitter: “Mian Sahib strongly opposed this decision. He even said that I cannot burden the people with one more penny.”
She said her father stressed that he was not on board and that if the government was bound by some constraint, it should go ahead with the increase. Maryam said the PML-N supremo disowned the POL increase decision and left the meeting. In another Tweet, Maryam said that she was standing with the masses and cannot back this decision.
Finance Minister Miftah Ismail, meanwhile, said that he respects the PPP leadership and would address Asif Ali Zardari and others’ reservations over the decision related to the prices of petroleum products.
After coming under severe criticism, the finance minister explained how petrol prices are calculated.
Responding to senior journalist Hamid Mir on Twitter, the finance minister said the government had not imposed any tax on petroleum products.
Miftah explained that the Oil and Gas Regulatory Authority (Ogra) takes the average of Platt prices, adds freight and premium paid by PSO on top of these prices and multiplies that by the exchange rate. In addition, he added, it also “trues up” the previous fortnight’s cost by taking into account the rupees paid by PSO at the actual exchange rate as opposed to the average used to estimate the previous fortnight’s cost.
The minister said that the government has not added any new tax or levy to the price. “The price of petrol has gone up (and diesel has gone down) because the cost paid by PSO in the previous fortnight was more than the cost estimated by Ogra and also because the premium paid by PSO on petrol increased and premium paid on diesel remained unchanged.”
Clarifying his position, the minister said that he did not say that the price will not be increased. “Mir sahib, I said I will not add one penny of new taxes or levies to the price. And I have not. But you know Hamid sahib that the fuel price summary is moved by Ogra and sent to Finance Division through the Petroleum Division. We get it only a few hours before prices are set.”
Miftah said, “I am an easy target. Which is fine. But this price change only reflects the change in PSO costs and doesn’t have any new taxes.”
He further added that people are welcome to critique or criticise him.
“I know I am sincere to my country and have saved it from default & working to the best of my ability.”
Mehtab Haider adds: Addressing a press conference at Q-Block (Finance Minister) here in the federal capital, the finance minister announced to defend every step taken by the Shehbaz Sharif government, saying that he owned all steps and firmly stood behind every decision including hiking petroleum prices.
Also, top official sources confirmed to The News that Miftah Ismail and State Bank of Pakistan acting governor Dr Murtaza Syed duly signed and sent back a Letter of Intent (LoI) to the International Monetary Fund (IMF) on Tuesday evening.
The IMF’s Executive Board is scheduled to meet on August 29 in Washington DC for considering Islamabad’s request to approve the next tranche of $1.17 billion under Extended Fund Facility (EFF). Pakistan also requested the IMF’s Board to augment the loan facility by jacking up its size from $6 to $7 billion and a time limit from September 2022 to June 2023.
“We will not breach the signed agreement with the IMF and will implement whatever is written in the Fund agreement. The petroleum levy will be jacked up by Rs10 per liter if it is written in the IMF agreement,” Miftah said.
When the minister was asked about bringing a mini budget through promulgation of presidential ordinance, he said that the government had to face revenue loss of Rs15 billion after waiving off fixed tax collected from small traders through electricity bills. He said that when the amendments would be introduced there would be loss of Rs15 billion while the government would be able to collect Rs27 billion from traders during the current fiscal year. He said that the government had envisaged collection of Rs42 billion through fixed tax from small retailers which was collected through electricity bills. However, the minister said that there were some mistakes committed as fixed tax of Rs6,000 was imposed on electricity user of 50 unit in case of non-active taxpayer list (ATL).
Miftah said that the petroleum prices in Pakistan were still lower than in India and Bangladesh as it stood at Rs303 per liter and Rs308 per liter respectively. He said that the foreign exchange reserves of India were 60 times higher than Pakistan has and in case of Bangladesh it stood at $35 billion at the moment but Pakistan’s reserves were standing at $7.8 billion.
He said that when he assumed charge of Minister for Finance, Pakistan was labelled as fourth likeliest country facing risk of default but now no one talked about default-like situation for Pakistan.
Today, he said Pakistani rupee was the strongest currency against US dollar as it appreciated against other currencies.
He alleged that Imran Khan trapped Pakistan’s economy as Pakistan Tehreek-e-Insaf (PTI) breached IMF agreement and provided unfunded fuel and energy subsidies. The PTI escalated the country’s debt but did not accomplish single development projects.
He said that the PTI hurled wrong slogan for getting genuine independence when the country struck highest ever trade deficit of over $48 billion, current account deficit of $17.5 billion, and the budget deficit of over Rs5,000 billion. How could the country’s leadership follow path of self-reliance when the prime minister and minister for finance was running from pillar to post in every country by picking up begging bowl, he questioned. He said that the PTI did not take even a step to avoid default rather they provided tax amnesty to their friends, provided unfunded fuel and electricity subsidies. The PTI did not take single step to curtail imports by one rupee through any efforts, he added.
The minister defended the government’s policy for hiking the petrol prices in the domestic market and argued that the average price of POL products in the international market and average exchange rate was placed and calculation was done by the Oil and Gas Regulatory Authority. The Ministry of Finance just takes decision to impose tax and petroleum levy but this time none of them was raised.
He said that the average price of petroleum products and improved exchange rate would result for providing benefit to the consumers if prices in international market remained on lower side.
He was of the view that the imports would be curtailed to bring it in line with the remittances and exports levels. He conceded that the curtailment of imports would negatively impact the tax revenues but hoped that the FBR’s tax machinery would make all out efforts for achieving the desired tax collection target of Rs7.4 trillion without any additional tax measures.
He said that the country had to pay back external debt servicing of over $21 billion when the country’s foreign exchange reserves were standing at $7.8 billion.
The minister said that the IMF shared LoI and both the Ministry of Finance and SBP made slight modifications and now it would be dispatched back to IMF today (Tuesday).
Agencies add: The minter for finance said that loan disbursements under the Extended Fund Facility (EFF) would start by the end of this month.
The minister said that the imports were recorded at $80 billion during the fiscal year 2021-22 whereas the exports stood $31.7 billion, bringing trade deficit to $48.3 billion.
During the year, the remittances were recorded at $30 billion.
He deplored that during its 4 years turn, PTI government took around Rs19,300 billion debt which is around 79 percent of total debt taken in 71 years.
He said, the incumbent government curbed imports including non-essential and luxury goods and then vehicles, air-conditioners, fridges, and locally assembly products that needed 90 percent imports.
He said the government was monitoring imports, exports and remittances, adding that so far there had been $3.4 billion outflows and $4.1 billion inflows during the month of August.
So more dollars are coming in than going out, he added. The minister said that imports have been reduced by 20 per cent compared to last year while exports increased by five per cent compared to last year.
Miftah said that the economy was improving and the government’s next target is to control inflation. The finance minister said that the government has averted default by taking difficult political decisions and a beginning has been made to put the economy on sound footing, adding that more difficult decision would be taken by the government.
