SBP to study impact of daily oil price changes

The government has directed the State Bank of Pakistan (SBP) to carry out a study to assess the impact of daily price revision of petroleum products on inflation in line with the international best practices and establish a mechanism to curb inflationary pressures.

The directives were issued by the National Price Monitoring Committee (NPMC) in a recent meeting, where it also expressed concern about overcharging for liquefied petroleum gas (LPG), which drove inflation higher. It was informed that tomatoes were being imported from Iran and Afghanistan and plans were afoot to buy them from Romania.

The chief economist apprised the committee that the SBP was mandated to ensure price stability through effective monetary policy measures, including the use of policy rate to manage money supply, anchor inflation expectations and achieve the inflation target set by the Planning Commission. He highlighted that in the context of the daily revision mechanism for motor spirit (MS) and high-speed diesel (HSD), the SBP needed to prepare a comprehensive action plan within 15 days to address the associated inflationary pressures.

NPMC agreed that the provincial governments, AJK, G-B and the Islamabad Capital Territory (ICT) should make necessary arrangements for the implementation of its guidelines to shield consumers from the impact of daily revision in MS and HSD rates by preventing unjustified price hikes and maintaining smooth supplies of essential items.

NPMC decided that the Oil and Gas Regulatory Authority (Ogra), in coordination with the provincial and regional governments and the ICT administration, would monitor LPG prices and take measures to curtail the difference between the notified and actual prices received from consumers. It was also outlined that the Ministry of Science and Technology would coordinate with the Pakistan Bureau of Statistics (PBS), provinces, autonomous regions and ICT to develop standards for testing loose milk, dairy products, loose edible oil and ghee. Similarly, the food authorities of sub-national governments will get the items tested from accredited laboratories and submit quarterly reports to the NPMC.

Additionally, the sub-national governments and the ICT will take necessary measures to minimise the wholesale and retail price gap across different cities and ensure a smooth supply of essential items.

PBS briefed the committee on the wholesale and retail price difference observed across major cities. It was noted with concern that retail prices of LPG were extremely higher than the prices notified by Ogra, signalling the need for effective monitoring and enforcement measures. An Ogra representative elaborated that the prevailing price difference was mainly due to the impact of US-Iran conflict on global markets.

NPMC discussed the impact of the recent reduction in petroleum prices and reviewed the findings of the Ministry of S&T regarding edible oil, ghee and milk samples. PBS highlighted the recent trends in the Sensitive Price Indicator (SPI), movements in prices of essential commodities and factors contributing to price pressures. The committee was informed about the elevated prices of key commodities, including tomatoes, chicken, wheat flour and LPG.

A representative of the food security ministry explained that the elevated prices of tomatoes and chicken were primarily attributable to the seasonal factors. Regarding tomatoes, the representative mentioned that prices typically remained high from July to October due to seasonal production patterns. To bridge the demand-supply gap, tomatoes were imported from Iran and Afghanistan.

However, owing to the closure of Afghanistan border, the remaining requirement will be met through imports from Romania. The chairman suggested that the food ministry may hold a meeting with the private sector on importing such products in advance to restrict price spikes.