Miftah firm on petrol price hike despite criticism

Amid rifts within the PML-N over the recent increase in the price of petrol, Finance Minister Miftah Ismail on Tuesday announced that the petroleum levy would be further jacked up from next month.

He also refused to change the course of economic policies that pulled the country back from the brink of default.

“Should we start repeating mistakes and picking fights with the IMF (International Monetary Fund) particularly when the economy has shown signs of stability?” questioned a defiant finance minister while addressing a news conference.

He spoke with the media hours after facing criticism from his party’s Vice President Maryam Nawaz as well as senior journalists for increasing the rate of petrol.

To a question whether or not Maryam’s tweet was part of a policy of playing “the good cop and bad cop” and would the government still increase taxes as per the IMF agreement, Miftah replied: “The Rs10 per litre petrol levy will increase by 100%. [It will] happen from September 1, whether I stay [the finance minister] or not.”

The government is charging a petroleum levy of Rs20 per litre on petrol and Rs10 each on high-speed diesel (HSD), kerosene oil and light diesel oil (LDO) in line with its commitment with the IMF.
Under the deal, the government has to gradually increase the petroleum levy to Rs50 on oil products to collect Rs855 billion during the current fiscal year.

The finance minister also said the government had signed and sent a letter of intent to the IMF board, requesting approval of the next loan tranche of $1.17 billion. Therefore, he added that there was no question of going back on the commitments given to the IMF. He hoped that the board would approve the tranche on August 29.

He added that the government’s coalition allies should also be congratulated for “burning their political capital” for the country’s sake, hoping that the nation would understand the situation.

The finance minister faces an apparent revolt from within the party at a time when the country has just survived an economic default after it started reversing the “wrong” policies of the previous PTI government.

Read POL prices likely to drop by up to Rs15 per litre

“The country cannot achieve self-reliance and true independence by running high trade deficits,” the finance minister claimed while defending his decision to increase the petrol price.

On Monday, the government had increased the rate of petrol by Rs6.72 but that of high speed diesel (HSD) and kerosene were reduced by 51 paisas and Rs1.67 per litre, respectively.

The price of petrol was raised to Rs233.91 from Rs227.19 per litre. The previous PTI regime had abolished the petroleum levy and frozen the price of petrol at Rs150 per litre for four months, derailing the IMF programme and exposing the country to default.

After initial hesitation, the PML-N led coalition has been increasing petroleum prices since May 15 under the IMF deal.

Miftah explained the formula for working out the petroleum products prices. He elaborated that the Oil and Gas Regulatory Authority (Ogra) took the average Platts prices. “They are then multiplied by the average exchange rate of the previous day and then it adds freight and the premium paid by PSO (Pakistan State Oil) on top of these prices,” he added.

“In addition, it also ‘trues up’ the previous fortnight’s cost by taking into account the rupees paid by the PSO at the actual exchange rate, as opposed to the average used to estimate the previous fortnight’s cost,” the minister specified.

Miftah said that the country paid $8.5 per barrel premium on diesel and $17.5 per barrel on petrol.
He argued that the government had not imposed new taxes on petroleum products and the prices increased due to other factors.

“The increase or decrease in prices is according to the purchasing by the PSO,” he added.
To a query about PML-N supremo and former premier Nawaz Sharif’s “annoyance” over the price hike, the minister replied that the ex-PM was part of the meeting that deliberated on the petrol rate.

However, he added that it would not be “appropriate” for him to comment any further on the issue.
Miftah said the economic situation was improving in Pakistan and in a better position than before, adding that further positive effects would be seen as the rupee’s appreciation continued and crude oil prices went down.

He added that the US dollar had come under control and its price was continuously declining against the rupee for the past 15 days. “The rupee's strengthening should reflect the strength of the economy and the current account position,” the minister added.

Read more Govt’s petrol-hike move catches people off guard

Miftah noted that during the first half of this month, the outflow of dollars from Pakistan stood at $3.4 billion as against $4.2 billion inflows, indicating that the situation was becoming better.

He added that the government was trying to increase the inflows on account of exports and foreign remittances to $65 billion while restricting the imports to $70 billion in this fiscal year.

“The country had booked a current account of nearly $17.5 billion in the previous fiscal year on the back of $80 billion imports,” he claimed.

The finance minister maintained that tackling inflation was next on the government’s agenda.