Fuel subsidy pressure: Govt finally caves in

Published: March 1, 2011

Key coalition partner MQM rejects price increase. DESIGN: SAMAD SIDDIQUI

ISLAMABAD: Despite increasing petrol prices by an average of 9.9 per cent, the government will continue to subsidise oil consumption in the country at a cost of at least Rs5 billion a month.

The Oil and Gas Regulatory Authority (Ogra) issued a notice on Monday, raising petrol prices by Rs7.23 per litre, or 9.9 per cent, to Rs80.19 per litre. Diesel prices went up by 9.83 per cent, or Rs7.70 per litre, to Rs86.03. The new prices are due to go into effect on March 1 (today).

Yet, the government, under severe political pressure from its coalition allies, did not pass on the full effect of the rise in international oil prices to domestic consumers. As a result, the government will continue to subsidise oil consumption, which is expected to cost the national exchequer Rs5 billion for the month of March alone, according to Ogra officials.

“Crude oil prices are continuously rising due to political turmoil in the Middle East and the rise is very steep,” said Jawad Naseem, the official spokesman of Ogra.

Brent crude oil has risen by over 16 per cent in trading on the London-based Intercontinental Exchange over the last month, closing at over $111 per barrel on Friday.

Jawad, who is also the Executive Director Finance Ogra, said that since November the prices of petroleum products increased between 23 per cent and 25 per cent, but the government has only passed on 10 per cent to the end consumers largely due to political pressure.

Over the past three months, the government has refrained from increasing petrol prices at considerable expense. The ministry of finance estimates that keeping prices stable since November has cost the government Rs13 billion. The current increase will save the government Rs11 billion in subsidies for the month of March, but it is far less than what the finance ministry wanted.

In a meeting with President Asif Ali Zardari, Finance Minister Abdul Hafeez Sheikh had proposed a 20 per cent price increase as the ministry’s preferred option, which the president ruled out as unacceptable.

The decision is expected to provide some ammunition to the country’s financial managers who are due to meet a staff-level delegation of the International Monetary Fund this month to show their commitment to implementing serious reforms.

The IMF provided an $11.3 billion bailout package to the government in November 2008 to rescue the country from a growing fiscal crisis but placed conditions on its aid, including fiscal reform and a deregulation of energy prices as well as an end to all subsidies. The government has faced resistance from the opposition as well as its own coalition partners in adopting the IMF’s proposals, as a result of which the IMF has decided to suspend the remaining tranches of the bailout, worth $3.3 billion.

MQM rejects increase in petrol price

The Muttahida Qaumi Movement has condemned the increase in the prices of petroleum products by the federal government, describing it as “a totally wrong decision”.

The MQM Coordination Committee held a joint emergency meeting in Karachi and London to review the government decision and the uneasiness it has caused among the people. It warned that if the government did not withdraw the increase within three days, it will announce its future strategy.

The coordination committee said the increase in fuel prices will send prices of the daily-use items soaring. The MQM urged the federal government to withdraw the increase. Instead of overburdening the common people, the government should bear it and levy taxes on incomes of landlords.

Published in The Express Tribune, March 1st, 2011.

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Reader Comments (49)

  • Abdul Ali
    Mar 1, 2011 - 8:19AM

    Do you not realise that IMF review team is visiting Pakistan. This had to be done to get money from IMF.
    Who really cares about the people of the country. Let them suffer and suffer more.

    Let us see what MQM does all hopes of the masses are on MQMRecommend

  • MuslimBoy
    Mar 1, 2011 - 8:27AM

    When a bunch of retards run the govt the economy will keep going in to the slump. How is the govt supposed to keep up with these subsidies. Recommend

  • Yaqoob
    Mar 1, 2011 - 8:44AM

    I think Govt. need to make interest payments to IMF for billions it borrowed using revenue from petroleum taxes. I think payments were supposed to be in March.Recommend

  • Noor Nabi
    Mar 1, 2011 - 9:05AM

    Yes, the feudals – who have sucked the blood out of the common man – should be bearing the brunt. And bring back the stolen wealth of the masses. MQM is absolutely right.Recommend

  • Maria
    Mar 1, 2011 - 9:19AM

    Why can’t our people grow up and understand that if the price of oil goes up in the world market due to Middle East instability, it obviously means prices of petrol will go up in Pakistan?Recommend

  • Waqas Rao
    Mar 1, 2011 - 10:32AM

    @Maria, Why can’t our people understand that the prices of oil are already so high in our country that increase in world market only means that the margin for our corrupt leaders become less.

    Please increase my salary by 25% and i will accept this increase this petrol prices easily :)Recommend

  • Hassan
    Mar 1, 2011 - 11:00AM

    Please try to understand the issue if the prices of petrol is not increased, govt would have to give a subsidy more loans from the state bank more money being printed more inflation. The idea is not to hold prices constant the idea is to grow the economy to allow people to earn enough to be able to withstand these increases.

    MQM will wait and see what they get in return before they announce their strategy opportunists!!!!!!Recommend

  • Hassan
    Mar 1, 2011 - 11:02AM

    MQM is waiting to see what they will get before they announce their strategy!!!!!!Recommend

  • Hmmm
    Mar 1, 2011 - 11:12AM

    MQM yesterday went to the dealers and assured them of their cooperation to get them the increase in their margins. and now they are opposing the hike in rates. What duplicity.Recommend

  • abdullah
    Mar 1, 2011 - 11:16AM

    all those who r talking about mqm r ppl who have no knowledge of whats hapening intrernationaly ..the prices of ol have gone up so much and the gov needs 2 increase…what other sources of income do v have 2 provide subsidies .MQM at this point is being selfish…becoz best decisions r those which r taken in the interest of long term country benefits ..not 4 gaining votes…this is not a gud politics 4rm MQM never expected this from ppl who r educated…Recommend

  • Javed Iqbal
    Mar 1, 2011 - 11:42AM

    They are also getting free fuel from Kuwait. What about that?Recommend

  • Mar 1, 2011 - 11:58AM

    “Everyone” is playing politics in this country & sincere with his/her own interests. Nawaz Sharif had knowledge of it before hand and decided to quit to gain masses sentiments and get 2/3 majority votes in the next election because of the his political graph going down. Similarly you all would listen Altaf Hussain quitting the government (his old political stunt) and gaining masses support of being a so called LEADER of Lower Middle Class party. Mr. Asfandyar Wali Khan would issue a sermon from Dubai calling it a “Zulam” (In Justice). Mr. Fazl u Rehman would call for a protest after Juma prayers and return in his official Jeep to his “official residence”.

    After a few days of hue & cry everyone would sit quite and work on the same salary. Masses would also follow the suit and after cursing the government would settle down and vote again for Zinda Hai BB Zinda Hai (Benazir is still alive).

    Welcome to Islamic Republic of Pakistan ! Recommend

  • Kazmis
    Mar 1, 2011 - 12:40PM

    @Abdul Ali:
    MQM can pressurize Government for reverse of petroleum prices, people can move for Inqilab, but friends just think that whole middle east is in turmoil of Inqilab, in result petroleum price hike, poverty death and agony. Respect the half bread and face the time with patience and dignity…Recommend

  • Ekram
    Mar 1, 2011 - 1:06PM

    The mass majority of poor and middle class people of Pakistan don’t know and don’t wanted to know what is happening in the world.
    Inflation is rising day by day and only those people can talk about International market who can afford increase in petrol prices, they have their pockets and stomach filled they don’t know how the poor people are living now a days when prices of raised to more than 100/kg.
    Pakistan is heading towards 2 class system, Elitists and Poor. Recommend

  • Abdullah
    Mar 1, 2011 - 1:31PM

    @Abdul Ali:
    Are you freaking kidding me !!! hopes with MQM they are murderers and plunders of karachi how can anyone have hopes with them Recommend

  • parvez
    Mar 1, 2011 - 1:43PM

    The government spends BILLIONS on free petrol and telephone calls for all senior and not so senior persons in all departments. Why can’t this be rationalised ?
    The government spends BILLIONS on the Presidency and Prime Minister. Why can’t this be rationalised ?
    The government spends BILLIONS on pensions which apparently never stops. Why can’t this be rationalised ?
    If the government would reduce its expenditure it would have some moral ground to ask the people to pay more, because it is the people that pay for all the above.Recommend

  • Mar 1, 2011 - 2:33PM

    So an average guy who uses 50 liters petrol every month will pay 500 rupees extra. And then the real movie begins of rising prices and he will feel like running away from this country where he’s just working to pay taxes and bills.Recommend

  • Qutub
    Mar 1, 2011 - 2:34PM

    Even If it is the counter effect of Middle east situation, the load should not be transfer to lower & middle class who already is inhumaly underburden. Immediate plans should be execute to recover the bank loans which were waived off during last 5 or 6 decades. Feudals & industrialists shall be strictly held responsible to pay tax on their overall income. Government facility of car&petrol should be review. Leakages of power supply shall be stop at every cost. Upper class & middle class must encourage display of a simple life in their routine, marriages,ceremonies etc. Usage of Bi-cycle should be encouraged and the elite class should lead here.

    Please allow me to say, today we are reaping what we have been sowing for so long. A common man is still ready to support those parties that have bring him to this today’s plight and he still believes on their agendas based on political motives. How unfortunate is this that in such important decisions and policies, competent technocraetes have no role or say and these are being dealt with political parties only whose ultimate aim is to gain vote in next election,by hook or by crook.Recommend

  • Mar 1, 2011 - 2:37PM

    The solution to absorb these rising fuel prices lies in MASS TRANSPORT SYSTEMS for Karachi and Lahore to start with and applying them in all the big cities.
    MTS will discourage people from using their own vehicles and will contribute in saving billions of dollars of petrol expenses.Recommend

  • anyonymous
    Mar 1, 2011 - 3:56PM

    the original price of a barrel of petroleum is 9435 Rs (i.e. 111 USD) for which, a litre becomes 80.69 Rs. Where is the so-called subsidy dude? you are taking every paisa from your people and saying that you are giving a subsidy of Rs. 5b per month to people. this is crap!Recommend

  • Hmmm
    Mar 1, 2011 - 4:13PM

    @anyonymous: Nice that you are so well informed. The crude prices are not petrol prices. Petrol is a refined product and has additional costs associated with it. it is good to do some primary research before making such comments. It is true that government is not giving any subsidy from its pocket, all what is doing it forgoing Rs4/liter on the Petroleum Levy which it collects as revenue.Recommend

  • Zia Ur Rehman
    Mar 1, 2011 - 4:17PM

    1 barrel = 117.347765 litre. Recommend

  • OnceaMohajirAlwaysaMohajir
    Mar 1, 2011 - 4:20PM

    We are ready for a mass revolt against this government of the rich landlords. Because the rich don’t pay taxes government today is asking poor and middle class of this country to pay for their luxury . This increase will increase the price of basic commodities for survival. We will never let this happen Pakistan is boiling and we will close down every business of this so called rich landlords. Brothers we are all ready we will go on a mass strike till this government falls and military. People of Sind especially Mohajirs will take Pakistan back to their past glory.

    1) We need price of electricity reduced by half.
    2) We need price of petrol to be reduced to 2007 level.

    InqalabRecommend

  • Hmmm
    Mar 1, 2011 - 5:48PM

    @OnceaMohajirAlwaysaMohajir: Where did you do Hijrat from? I was born in Karachi and raised in Karachi – but I think I am a Pakistani first and then a Sindhi. I cannot be a Mohajir if I have not migrated.

    So you need electricity prices to be halved. Good luck with that. Yes we have a lot of inefficiency problems in our power system but the prices cannot be reduced as the government cannot offer more subsidies. It is already facing a tight fiscal crunch.

    Why do you want the petrol prices back to 2007 level? Do you produce petrol in Pakistan? No you dont. You import it – so you have to pay the price for imports. you dont import it at the 2007 level – so will have to live with the new price. As much as I dislike the present government – just everything what they do cannot be wrong. Not every other thing will lead to revolution. And mind if, whenever a revolution comes in Pakistan it will be against suppression or for freedom of expression and justice – it will never be in the name of inflation and hunger. Mark my words.Recommend

  • Faisal
    Mar 1, 2011 - 5:50PM

    For all those who say the price in international market has risen according to that even the current price is PKR.59.84/ liter then why is government selling it at 80 so please get aware !!!! its all going into the pocket of these big ruling landlord feudal elite class who does not pay any income tax and are not ready to impose agriculture tax. Come on people when are nation is going to step out of this bias if someone do good then we should appreciate it.

    I am not a supporter of MQM but what is wrong if they are demanding for a right thing that these feudals should be taxed. We should appreciate it at least.Recommend

  • Karim
    Mar 1, 2011 - 6:02PM

    For all those people who said that MQM bargains and are waiting what can they get just look in the recent past MQM quits the government on increase in petroleum prices they went to sit on the opposition benches and when the prices were reversed they just sat on treasury benches and even left the 2 ministries they had now they do not have any ministry.

    And those who would now say why they sat back on the treasury benches because firstly the government took back their decision which was their demand and secondly Mr. Nawaz Sharif instead of welcoming them in the opposition lashed out against them which clearly indicated that he was not ready to change the corrupt government of Mr. Zardari and at that point it created a political turmoil as the government became a minority in the assembly which would have caused more chaos in the country.Recommend

  • Mar 1, 2011 - 6:07PM

    I’ll be willing to pay any amount of petrol when Nawaz Sharif comes out of his Raiwind Farms and lives like a normal Pakistani.

    Zardari and Gillani also take measures to cut down the costs of Presidential Palace and Prime Minister House.

    Funny? yea it is. I know am asking too much or may be dreaming…Recommend

  • Hmmm
    Mar 1, 2011 - 6:33PM

    @Javed Iqbal: We DO NOT get ANY free fuel from ANYWHERE. Let’s get it straight. Back in the 90s we used to get it on cheaper rates and on deferred payments. That does not happen anymore. So please, do not be fooled and do not fool others. The electronic media is already there, and that is enough of sensation.Recommend

  • karachicow
    Mar 1, 2011 - 8:29PM

    @OnceaMohajirAlwaysaMohajir: I am with you brother as millions of other Mohajirs all over Sind we will bring back this country of ours to its past glory. Altaf Hussain is very soon going to make an announcement to bring down this corrupt government which is being blackmailed by rich punjabi landlords. We will stop businesses all over Sind after this friday. Its a day of rage let the fire begin stop all business and bring this country to standstill till our demands are met.

    MohajirforpkaistanRecommend

  • Mar 1, 2011 - 8:34PM

    Think it over please. On every rise of petro products price we become angry and the same get reflected in our comments. Same is the case with other SAARC nations including Pak and Nepal. Petrol price hike in india in this inflationary period will be wrong as situation can be tackled well by reducing motor fuel taxation in this hyper inflationary era. Are we using imported and costly petro products and other energy resources in the SAARC region the poorest area in world? We indians are proudly wasting about 40 billion liters of costly and imported LPG and kerosene in India and not even thinking of using free, infinite, green indigenous solar heat and light instead of them. Why we do not use indigenous induction electricity which is even cheaper than subsidized LPG? Pakistan and Nepal where LPG and kerosene are not even subsidized are also one step ahead of us. We are using billions of liters of imported diesel for irrigation but are never thinking of rain water harvesting and ground water recharge. We feel proud in using personal vehicles and are ashamed of traveling in shared vehicle, two wheelers and public transport. Why we are not asking for development of railways on war footing as railway is most cost efficient mode of transport and that too by indigenous fuel. Grossly under recovered diesel and kerosene are frequently being used for production of costly power for business but cheaper energy sources are being wasted at homes and if not adequately paid for. I will once again request all SAARCians to use costly and imported petro products judiciously to save our respective countries from becoming poorer and use cheaper and indigenous resources more and more. Recommend

  • Mar 1, 2011 - 8:40PM

    @Billio Bhaya, I’m your fan!Recommend

  • Tahir
    Mar 1, 2011 - 8:40PM

    Lets see if MQM really leaves government or will be acting like last time.Recommend

  • Javed Iqbal
    Mar 1, 2011 - 9:26PM
  • Bangash
    Mar 1, 2011 - 9:47PM

    Shows govt is not serious about Pakistan’s economy or budget deficit, just politics.Recommend

  • Pakistani
    Mar 1, 2011 - 10:35PM

    well MQM’s stance is logical. I totally agree with the mass here, that international prices have hiked up, but petroleum is the worst to put the burden on. You can probably increase land taxes? carry out land reforms? put taxes on more than one private vehicle? increase the call rates on mobile phones? put taxes on 5 star hotels? reduce the number of vehicles that His Highness Sir Asif Ali Zardari carries with him? reduce the land cruisers and hummers in interior sindh and punjab, there are loads of options, except our awaam either acts stupid, or actually is.Recommend

  • Billoo Bhaya
    Mar 1, 2011 - 11:40PM

    @Ali Qureshi:
    Thank you Ali Qureshi for your kind words of endorsement.Recommend

  • imran can
    Mar 2, 2011 - 12:06AM

    lets start a facebook and twitter movement this friday
    onwards day of rage will start and will end once the rich
    punjabi landlords are brought under tax system and start
    paying for subsidies for petrol and food. I declare today
    to mohajir we will fight for pakistan let us strike till
    punjabi landlords are brought to their knees

    after friday prayers this nation will stopRecommend

  • Umair Patel
    Mar 2, 2011 - 12:38AM

    if oil price increase in the world then we must have to pay our oil dues in international market after 6 months why our government reacting now they charged 200 to 300% tax per letter they must reduce there tax price Recommend

  • Abdul Naim
    Mar 2, 2011 - 1:24AM

    lets do it brothers this friday will be remembered as a
    day when mohajirs saved this country my area is ready
    inform our mqm brothers all over the country we will
    not stop till our demands are met punjabi landlords here we
    come we want you to pay your long due taxes we want
    you all to pat for your sins and food for the poor you have
    looted for decades MQM in my area is getting ready we
    need our beloved altar hussain that country is ready for
    revolution just give a go ahead we will bring this country to a standstillRecommend

  • khalid shaikh
    Mar 2, 2011 - 2:17AM

    we are all for the strike this friday may Allah give us courage to be successful in our mission it experts please start a facebook and twitter site for this strikeRecommend

  • Nadeem Ahmed
    Mar 2, 2011 - 3:43AM

    Revolution or no revolution, this government stays or kicked out, the price of oil will keep on rising. At the end of this year, we will be very lucky if we get petrol Rs. 150 a litre.Recommend

  • Hmmm
    Mar 2, 2011 - 10:58AM

    Strike for what? To press the already suppressed poor people whose lives depend on daily wages? The salaries class can afford a strike but not the poor working labor class. This is not a way to protest – if anything we should protest for bringing a major reform in the economic system and the lifestyle of the elite. And this Punjab and landlord bashing should end. Being a landlord itself in not wrong – it is the mindset that can be wrong. And we cannot blame the farmers for the mess, it is the government that fails to collect taxes. And moreover, it is not only jageerdaar who does not pay tax, the sarmayadar of the urban areas are equally responsible and most of them live here in Karachi. We should see the whole picture and not what MR Altaf Hussain says all the time.Recommend

  • Hmmm
    Mar 2, 2011 - 12:59PM

    @Abdul Naim: MQM brothers all over the country?? Really? Do you have them there as well? I doubt that because a major portion of Pakistan still does not face target killings and mobile snatching – which is a testimony that MQM is yet to spread beyond the urban Sind.

    And so you want to bring a revolution – right? And you want to start by saying that it will come from Mohajirs – here is the failure at the very beginning by discriminating even before starting a revolution. And even funnier is the fact that you want Altaf Hussain to lead this – you enjoy the government, in fact no party has been in the government more than the MQM – they were with Zia, with Nawaz, with BB, with Musharraf and now again with PPP. And your leader calls the army to take the country over and get rid of the chor, dakoo and luteray. Wow, if everyone is a dakoo here, then why do you have to continue with them ion the government. Just come out on streets, leave the power and then think of a revolution. And all problems are not only created by the landlords – the industrialists of the urban centers also make huge money and pay few taxes – how much did the billionaire Babar Ghauri pay in taxes??? You will get your answer.Recommend

  • abdullah kayani
    Mar 2, 2011 - 1:20PM

    i stay in karachi and will not cme 2 strike, this is foolishness ..y should v get our salaries deducted wen altaf himself is sitting in london and chilling ..this all is crap . i m sure no one will want their salaries 2 b deducted 4 nothing… i wonder y v keep on saying about the pinjabi landlords as if v dnt have landlors in sindh ..as if they all pay taxes comeon ppl b realistic lets start from home and than move 2 punjab…..MQM has only given us words could not stop target killing ,bhata khori…what will v go and ask the landlords…
    i think so v shuld go on strike 2 stop targrt killing and bhata khori.than v can get 2 the landlords…
    and i can see how enthusiastic u ppl r asking others 2 strt a twiiter pg on this crap..Recommend

  • Karachite
    Mar 2, 2011 - 5:13PM

    As a Karachite this strike is very necessary not because of Punjabi Landlords…lol but because petrol price rise is going to increase price of everything. It will affect travel expenses, food expenses and also electricity charges. In turn it will affect businesses. With this strike we have to bring down this government and have new elections. The new government should know the meaning of people power and listen to its citizens. I’m shutting down my business from friday onwards and will force others in Karachi to do the same. Regarding Landlords the new government has to force them to pay taxes or else there will be only anarchy.

    Karachi will strike till a solution is met. I urge Mohajirs, Sindhis, Punjabis all to co-operate or else face the music.Recommend

  • Hmmm
    Mar 2, 2011 - 5:58PM

    @Karachite: And who will you vote for when the time comes?Hat is your alternative plan? Stop importing oil? Recommend

  • imran can
    Mar 2, 2011 - 6:17PM

    @Hmmm you are anti national most probably part of the landlord mafia who doesn’t like to pay taxes but want to enjoy taxpayers money. Why haven’t you spoken anything against them till now? You have no problems with fuel hike which will lead to food price hike and electricity charges hike. Why? Why is it that you rich pakistanis never care for the poor. No matter what we will strike if not this friday then next friday. Allah is with us. He has seen poor pakistanis suffering everyday due to unemployment and now fuel hike will put more daily wagers out of employment. Do you see the point @Hmmm?Recommend

  • Karachi Transport Union
    Mar 2, 2011 - 6:42PM

    We are stopping transport tomorrow itself all over karachi we need your support @Karachite. We will bring everything to a standstill in Sind and Punjab if needed inshallah.

    We want the government to help the poor and middleclass not the rich.Recommend

  • Hmmm
    Mar 3, 2011 - 11:06AM

    @imran can: First things first – you have absolutely no right to call me anti-national. I am a patriotic and a proud Pakistani and consider myself a son of the soil. And I am not rich at all – I am an average salaries class citizen.

    I am part of no mafia at all – never did I say that those who do not pay taxes are right. Al what I said is there is too much emphasis on landlords – there are others around us who do not pay taxes either and industrialists, stock brokers, transporters etc fall in the same category. It is tempting to use the famous line of landlords because it is political in nature and sells well in the urban centers.

    I have problems with the fuel price hike but the bigger question is what is the alternative? Strike? No, it certainly won’t serve the purpose. We have got to find alternatives. Reforming the whole system is a long term thing and that will not change overnight. We will have to live with the oil price because we import the product. We will have to check our lifestyles – we have to bring it to normalcy. We have to live a simple life if we as a nation want to prosper. I want Pakistan to shine bright on the horizon, but revolution in the name of petrol price hike will never serve the purpose. Mark my words. Call me whatever you like.Recommend

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