Miftah hints at petrol price hike

Finance minister says treasury stands to incur Rs102 billion loss every month due to current petrol price

KARACHI:

Finance Minister Miftah Ismail on Thursday hinted at increasing the price of petrol, saying the incumbent government would strive to maintain the current rate and should there be any hike, no new taxes would be imposed.

In conversation with the media in Karachi, the minister lashed out at former premier Imran Khan's policies stating that the terms of previous International Monetary Fund (IMF) agreement stipulated a price of Rs245 per litre of petrol.

He noted that the government was currently accruing a loss of Rs30 per litre on petrol and claimed that the former government had agreed to not only avoid a loss of Rs30 per litre but also impose a tax of Rs30 and 17 per cent sales tax.

Miftah claimed that at the current price of petrol, the treasury stands to incur a loss of roughly Rs102 billion a month, if prices are not raised in May. He added that the government never sold petrol at a loss. However, he assured the media that the price of petrol would be subsidised "as much as possible."

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“Pakistan is losing Rs70 billion on diesel alone and the monthly expenditure of the government is Rs45 billion,” the minister stated, adding that the government would incur a loss of Rs102 billion on fuel alone "equal to the cost of running two and a quarter governments, which cannot happen."

The previous PTI government had announced a four-month freeze until June 30 on petrol and electricity prices as part of a series of measures to bring relief to the public.

In recent meetings with Miftah, the IMF had linked the continuation of its loan programme with the reversal of fuel subsidies.

The finance minister revealed that the government had earlier borrowed money from the market, but could no longer do so due to the State Bank of Pakistan's (SBP) new laws.

"If we do that, the government will have to pay interest. When the State Bank lends to us, we are printing money which drives inflation," Miftah explained.

He also stated that borrowing from private banks was not a viable solution since it would increase interest rates.

The finance minister assured that the price of petroleum products would not increase in the short term, owing to the pressure it creates on the working class.

On April 26, Miftah had announced that the government would devise a policy to increase petroleum prices, adding that the "elite class having big vehicles could not be given subsidy, however, those using less petrol such as motorcyclists will be given relief".

"Prime Minister Shehbaz Sharif has advised me that no economic pressure should be put on the common people," he added.

However, Minister of Information and Broadcasting Marriyum Aurangzeb subsequently announced that PM Shehbaz had rejected the summary for the increase in prices of petroleum products, accusing the former PTI government of “incompetence” stating that citizens must not suffer due to the mistakes of the former government.

In a statement, Marriyum added that the government of Imran acceded to the harsh conditions of the IMF and increased the prices of petroleum products in order to secure a loan from the international lender.

“This government is making every possible effort to not further burden people already facing the brunt of high inflation,” the information minister added.

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Power plants

The finance minister said that 7,500 megawatts power plants remained shut during the former government's tenure since they did not have fuel while 2,000 MW power plants were closed due to lack of maintenance.

He accused the PTI government of nepotism, saying his ministry did not have enough to pay to the Power Division to purchase fuel for the plants because the previous regime had borrowed “large amounts”.

The Pakistan State Oil's (PSO) receivables were over Rs500 billion and it would not be able to function if money was not provided, he said.

"In [Imran] Khan Sahab’s time, the PSO wrote to the energy secretary that it cannot import oil for other companies because it does not have the capacity. SNGPL (Sui Northern Gas Pipelines Limited), which supplies gas in Punjab and K-P, has faced Rs200 billion losses in the last three years.

"We have to fulfill that loss otherwise it will also face supply problems. We also have to give PSO money. Imran Khan's government has left problems everywhere because of incompetence and corruption," he said.

When the PML-N government's tenure ended in 2018, the country was progressing and there was no circular debt in the gas sector, he added.

"There was no load-shedding in the gas sector. Now, the sector is facing load-shedding.

"We left [the circular debt at] Rs1,062 billion in 2018. Circular debt is at Rs2,600 billion now. Will they (PTI) give me that?"