Due to a rising global demand of late, crude oil prices have been registering a V-shape recovery in the international market after hitting the sub-zero level in June 2020 – and that is a serious source of concern for the PTI-led government which is now compelled to pass the impact of a dearer black gold to the consumers who are already bearing the brunt of high inflation. For a second fortnight in a row, the incumbent government has raised the prices of various petroleum products. The government first increased the prices a couple of days after the announcement of the Federal Budget 2021-22, and a second raise has come coinciding with the start of the new fiscal year.
The new raise of Rs2 per litre in the price of petrol and Rs1.44 per litre in the price of high speed diesel means that the two commodities will now be sold for Rs112.69 and Rs113.99 per litre respectively till the 15th of July. The price of kerosene oil and light diesel oil has also been hiked by Rs3.86 and Rs3.72 per litre respectively, and their new prices will be Rs85.75 and Rs83.4 per litre, respectively. It goes without saying that the raise in the prices of petroleum products will add to the inflation by affecting the transport and agriculture sectors, in particular.
The raise in the global oil prices is not the sole concern for the government as it is under pressure to raise Rs610 billion during the fiscal year 2021-22 by increasing the petroleum development levy to keep the $6 billion bailout agreement with the global lender intact. The government is thus caught between the devil and the deep blue sea. In pursuit of Rs610 billion, the government will have to raise the prices of petrol and diesel by more than Rs30 per litre – which would take the prices to an all-time high and hit the consumers too hard. Otherwise, the IMF may say goodbye to the government, leaving quite a big gap in the government’s budgetary receipts.
Published in The Express Tribune, July 2nd, 2021.
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