Increase in fuel prices

IT has become a ritual of sorts in our political circus: successive governments are forced to raise the price of fuel — petrol, diesel, kerosene etc — for reasons to do with revenue or the scaling back of subsidy expenses, only to be met with howls of protest from the opposition.

The PPP government was forced to see through a massive fuel price hike in 2008 when, as part of an urgently needed IMF programme, it had to eliminate fuel subsidies in one go. The ex-depot sale prices of petrol and diesel, for instance, were Rs53 and Rs32 respectively when the elections of February 2008 took place; they shot up to Rs86 and Rs56 by July because the newly elected government had no choice but to pass through the full impact of the global price to consumers at the pump. It was the PML-N that raised a storm at the time, only to be confronted with a similar challenge when it was elected to rule.

The PML-N reaped a bonanza when the record-high oil prices finally crashed while the party was in office. But there was a flip side to this rapid fall. Since a large part of the state’s revenue comes from taxes on fuels, the government’s revenue collection was set to drop just as rapidly. So it resorted to raising taxes on fuel as the price declines accelerated, passing on only half the benefit to the consumer and keeping the other half to maintain the fiscal balance. The PTI protested through those years, arguing that fuel price increases burden the common man with inflation and should not be used for revenue generation.

Now that it is in power it is the PTI’s turn to discover that facts are indeed facts.

Yes, the devaluation of the exchange rate had made a fuel price adjustment inevitable, but those who came before also had their compulsions. Even the claim of the ruling party that it is keeping a lid on using fuels for revenue generation purposes holds little water. The sales tax on petrol, to take one example, was being charged at 8pc in the prices notified on Aug 1, 2018, which then rose to 17pc by Jan 1, fell to 12pc by May 5 and has again risen to 13pc in the latest notification on June 1. Of the Rs4.26 increase in the price of petrol, a full Rs1.34 is accounted for by the increase in sales tax alone. The PDL has also risen from less than Rs10 before the government’s arrival, to Rs 14 per litre today.

It is now the ruling PTI’s turn to face the same type of opposition that it had displayed to governments in the years gone by; today, it finds itself with no choice but to bow before the facts while taking the taunts of “economic terrorism” and “petrol bomb” in its stride.

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