Low-hanging fruit

Yet again, the prices of petroleum products have risen in the country, adding fuel to fast-rising inflation. Now it has emerged that nearly half of the entire amount that the public pays for a litre of petrol or diesel goes to the government’s kitty in the form of levies and taxes. Then there is the handsome margin for the dealer and distributor while individual fuel pumps further take their sliver of profit. Sources in the government have revealed that the government charges as much as Rs21 on every litre of fuel as a levy and Rs16 as sales tax, and nearly Rs4 as inland freight equalisation margin so that people across the country can get petrol and diesel at roughly the same price. Now petrol is largely used by smaller passenger vehicles and vans while diesel fuels the national transport and agriculture industry. Increase in their prices, as has been happening consistently since the new year, directly contribute to inflation as they impact costs to supply essentials.

Yet, we are told that Pakistan has one of the cheapest prices for petroleum products for non-oil producing countries in the region. There are arguments for hybrid vehicles and many are hoping that electric vehicles become available soon to save on transport costs. While we can criticise the government for going after the low-hanging fruit by collecting billions in levies and sales taxes on fuel to bolster its coffers, the real responsibility that the government has is towards creating a cheap transport system. It has not worked hard enough to create mass transit systems whereby people rely less on individual cars and vans. A wide and efficient national cargo train network can help reduce reliance on diesel guzzling trucks and help lower supply costs. Pakistan is a poor country and even minor fluctuations in fuel prices have real inflationary impacts. With over 40% of the population living under the poverty line, the government needs to strike a balance.

 

Published in The Express Tribune, February 8^th, 2021.

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