Rising fuel prices

The current trend of price rise seems to be interminable. On June 1, the prices of petrol and HSD were increased. On July 2, the price of CNG was increased by Rs20 a kg in Sindh, pushing up the price of the fuel to Rs123 a kg. CNG is now widely used in buses, freight trucks and cars. So the hike in CNG price will result in an increase in public transport fares, but this will be only a minor part of the overall impact of the fuel price rise on the economy. It will most significantly impact transportation of goods, thereby increasing the prices of all commodities, especially those of basic food items like wheat flour, rice, edible oils, lentils, sugar, etc. An increase in fuel rates pushes prices of all commodities, fuelling further inflation which is already high in Pakistan. This won’t be a demand-pull inflation but a cost-push one.

The Karachi Transport Ittehad, a transporters’ association, has announced that they will observe strike on July 10 to protest against the CNG price hike and to press the government for a proportionate increase in bus fares. Transporters want an increase of at least Rs10, because besides the increase in CNG price, the provincial government has increased the charges for route permits and vehicle tax. Further, now imported spare parts cost more due to the rising rupee-dollar parity. The ride-hailing services have already announced a five per cent increase in fares.

Now people in Pakistan are being crushed by the twin menace of ever-increasing taxes and inflation. The rising inflation would result in declining demand for goods and services. This will increase unemployment. Inflation has a negative multiplier effect. This is a depressing scenario. It is time for the government to tame inflation and keep its taxation policy in line with the taxable capacity of the people. Inflation does not benefit anyone. No government can defend it.

Published in The Express Tribune, July 5^th, 2019.

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