ISLAMABAD: People are set to face another wave of price surge as the government is reported to have decided to allow about 5 per cent increase in prices of petroleum products and more than 16 per cent hike in electricity tariff from April 1.
Already reeling under a double-digit inflation of over 11 per cent, particularly driven by an increase in prices of essential food items and energy, consumers are finding it difficult to absorb price shocks with their income remaining static because of negligible economic growth. As a result, the budgeted target of containing inflation within single digit is unlikely to be achieved, sources in the government told Dawn.
According to Federal Bureau of Statistics, average inflation in the first eight months of the current financial year rose by 11.08 per cent over that in the same period last year. Monthly inflation in February was about 13.04 per cent more than in the same month of last year.
Transport and communication and fuel and lighting – the two major groups in the consumer price basket – together contribute about 15 per cent directly to the CPI (commonly described as inflation measured by consumer price indicator) but any increase in the prices of fuel, energy and transportation have an indirect spiralling impact on the cost of almost all commodities and services.
Having collected over Rs214 billion from oil business in eight months, the government is expected to increase prices of petroleum products by about 4-5 per cent from April 1 to pass on the impact of international oil prices to consumers, the sources said.
In addition, the government is contemplating to increase electricity tariff by about 19 per cent on two counts on April 1. First, the impact of international furnace oil prices on electricity generation would be absorbed by a Rs1.44 per unit increase in consumer tariff, for which the National Electric Power Regulatory Authority holds a public hearing on Wednesday. Second, the government would also increase the tariff by another 6.4 per cent under an agreement with the International Monetary Fund and the World Bank.
Sources in the petroleum ministry said that petroleum prices had maintained a rising trend in the international market over the past month and that would be passed on to consumers by the Oil and Gas Regulatory Authority on March 31. The international crude prices which hovered around $75-77 per barrel last month had now crossed $82 and its impact would be recovered from consumers, the sources said.
On the basis of international market data available for the current month, the prices of diesel, petrol and kerosene are likely to be increased by Rs3-4 per litre, but a final decision would be taken on the basis of international prices for the entire month.
Pakistan imports crude oil and petroleum products from the Middle East where prices generally remain $5-15 per barrel lower than in the British and US markets.
The government reduced prices of petroleum products by 1-4 per cent on March 1 because of a decline in the international market. It had increased POL prices by 5-10 per cent (between Rs4 to 8 per litre) on Feb 1.
The government charges a variable 16 per cent general sales tax on all petroleum products and earns a windfall when international prices go up. Besides, it also collects a fixed levy of Rs10 per litre on petrol, Rs14 on high octane blending component, Rs6 on kerosene, Rs3 on LDO and Rs8 on high speed diesel. The government is estimated to have collected more than Rs158 billion from July 1 to Feb 28 on account of petroleum levy and general sales tax.
The sources said petroleum levy on high speed diesel, light diesel oil, kerosene, HOBC and petrol generated about Rs77 billion during the first eight months of the current year, while the government has set a target of about Rs122 billion for the whole year.
The GST collection on petroleum products during July-Feb 2009 was estimated to be more than Rs81 billion, the sources said.
The government is estimated to have saved over Rs55 billion during this period on oil imports mainly because of lower international prices.
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