There seems to be no respite for consumers, as the caretaker government has once again raised petroleum prices — making it the second successive increase in two months. According to the latest notification, petrol prices have increased to Rs99.5, while the new price for diesel is Rs119.31. This means that since the caretaker government took charge, prices of petroleum products have witnessed a cumulative increase of Rs11.8. There is a lot of hue and cry over the second time increase in prices, however, if we look at it from an economic perspective this was bound to happen. Oil prices have been rallying for the most part in 2018, on tightening market conditions owing to record demand and voluntary supply cuts led by OPEC and other producers, including Russia. Apart from this the latest round of rupee depreciation has also added to the burden.
This was also stated by the finance ministry, in its statement, that the government had to pass the full impact of oil prices to the consumers following depreciation of the rupee against the US dollar. Currently, the consumers are paying Rs22.44 per litre taxes on petrol. The government was collecting Rs2.59 per litre custom duty, 9.85 per litre GST and Rs10 per litre petroleum levy on petrol. Transportation is a very important part of economic activity and the increase in fuel prices means that the overall cost of all the commodities will go up — leading to inflation. Just one example of this are the car providing services, used by a relatively large number of people on a daily basis. It is pivotal to the role of a caretaker setup to take substantive measures to ensure relief to domestic and industrial consumers from oil price fluctuations which will otherwise weaken the economy.
Published in The Express Tribune, July 3rd, 2018.