Pre-election relief

Prime Minister Shehbaz Sharif announced big cuts in fuel prices on Thursday, providing a small bit of relief to a country struggling to bear the burden of heavy inflation. However, the timing of the cuts has raised eyebrows: the announcement came less than 72 hours before by-elections in Punjab, the results of which will determine whether the Prime Minister’s son, Hamza Shehbaz, will be able to maintain a majority and continue as chief minister.

Shehbaz did little to ease suspicions in his late night speech announcing the cuts and other initiatives, making a direct reference to ex-PM Imran Khan’s attempt to save his government by cutting fuel prices days before the no-confidence vote. But while some have accused Shehbaz of hypocrisy, international oil prices have been declining, and some PTI leaders, including former finance minister Shaukat Tarin, have inadvertently defended Shehbaz by saying the cuts did not go far enough. Tarin said on Twitter that the cuts should have been about Rs44 per litre for both petrol and diesel — the actual cuts were Rs18.5 on petrol and Rs40 on diesel. This would suggest that the government was actually being conservative with its cuts, hedging the country against international price fluctuations rather than seeking its own short-term political benefit.

Meanwhile, petroleum products dealers have threatened to go on strike from June 18 if the government does not accept their demand to almost double their allowable margins from the current 3.5% to 6%. While some of their gripes are legitimate, such as the impact of increased minimum wage and higher electricity prices eating into their profit margins, the massive increase that is being demanded is still unsettling. It also appears to be a negotiating bluff since the same 6% margin demand was put earlier also and rejected by the PTI government without incident; and shutting down due to low profit margins rather than losses, makes little sense as there is zero revenue if the stations are closed. However, the distribution issue is no bluff and needs immediate state attention, lest pumps nationwide begin to run dry.

Published in The Express Tribune, July 16^th, 2022.

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