KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary Abdul Aleem has defended the recent hike in petroleum product prices, claiming that keeping them unchanged would have been a mistake.
To support his stance, he cited the rise in global crude oil prices and a significant depreciation of the rupee in the past seven months.
“The government has been collecting taxes in rupees, but is paying for petrol in dollars; since the rupee has weakened significantly coupled with the increase in crude oil prices in international market, the recent price hike was inevitable,” said Aleem.
“Businesses need to absorb the hike as much as possible and replace it with better productivity. If complete absorption seems impossible, then they should pass some on to consumers.”
He was of the view that politics should not precede economics and the country needed to follow benchmarks and take steps when needed.
His comments came after the caretaker government increased petroleum product prices by up to 9%, which irked many consumers. Separately, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) urged caretaker Prime Minister Nasirul Mulk to look into the hike in petrol and diesel prices.
In a statement, the FPCCI criticised the government for enforcing short-term decisions by blindly increasing petrol prices on the pretext of stabilising the economy.
“The government should consider some proper mechanism and frame concrete economic policies to increase its revenues and stabilise national economy on sound footings,” FPCCI Senior Vice President Mazhar Ali Nasir said.
“Instead of using petroleum product prices as a tool to generate revenues, the government should curtail its unnecessary expenses, take austerity measures and widen the tax net,” he remarked. Nasir pointed out that the increase in petroleum prices would have a multiplier effect on trade, industry and economic activities that were already confronted with many challenges.
“The exorbitant increase will further spur cost-push inflation by increasing the cost of transportation of raw material and consumer goods. It will inflate cost of production, which will be unaffordable in present circumstances given that our exports are declining,” Nasir said.
He added that the high price of fuel would further increase the incentive and encourage its smuggling.
Estimates suggest around 15-20% of petrol consumed in Pakistan is smuggled from neighbouring countries, causing loss to not only the government exchequer, but also to the motorists using the adulterated fuel.
Published in The Express Tribune, June 14th, 2018.