An inevitable increase

The government’s decision to raise the price of petroleum products and add a 10 per cent infrastructure development cess on CNG, coupled with LPG producers, also increasing their prices, is sure to lead to strikes and protests. Given that prices have not kept up with inflation, this anger is understandable. But it is also counter-effective. As an importer of oil, there is little that the government can do when international prices keep rising, as it did recently after tensions between the US and Iran over the vital Straits of Hormuz. Foreign exchange reserves are low and it is not possible for the government to keep on subsidising oil imports.

Pakistan finds itself in a bind also because prices of most products we need to import have increased, while the prices of our main exports have plunged. The government has failed in attracting greater foreign direct investment and rebuilding ties with our international creditors. Our economy is dependent on IMF loans to keep it afloat and if we think we can do without international assistance, then a far greater burden is going to fall on consumers in the country. Our own nascent energy industry needs foreign help but cases like that of the Reqo Diq project, which was handed over to the Balochistan government despite agreements being inked with foreign investors, will not do anything to inspire confidence. Add to that, the precarious law and order situation and we are forced to rely on expensive imports. The government, meanwhile, has rarely been able to come up with solutions that go beyond the superficial. Every few months, the government suggests instituting daylight saving hours and two-day weekends, measures that do little more than apply a band-aid to a diseased arm. Reducing the demand for petroleum products may be impossible which is why we need to work with our neighbours to build gas pipelines while at the same time continuing to carry out exploration for gas fields in our own country. Until then, it is a sad reality that we will continue to see increases in the price of petroleum products.

Published in The Express Tribune, February 2^nd, 2012.