Reduction in petroleum prices: Government succumbs to pressure

PM announces reversal of petroleum price hike; US Secretary of State Hillary Clinton calls the decision a 'mistake'.

Zia Khan January 07, 2011


In a desperate move expected to temporarily tame a brewing political crisis, the government on Thursday withdrew the recent increase in petroleum prices.

The government apparently succumbed to pressure by opposition groups as Prime Minister Yousaf Raza Gilani announced in the National Assembly that his government had decided to reverse last week’s decision.

Though a top opposition leader called it “nobody’s victory or defeat,” the decision appeared to be the first setback for the government and the  first signs of weakness since it lost its majority in the parliament after losing support from two allied parties on various grounds.

Gilani hailed it as ‘sagacity’ of the political leadership that helped his administration to take what would have otherwise been an impossible decision.

However, US Secretary of State Hillary Clinton said it was a “mistake” for Pakistan to reverse fuel price increases.

Opposition Leader Chaudhry Nisar Ali Khan immediately welcomed the decision in a move that brought down inflated political temperatures after a week of chaotic bickering, which appeared to be posing existential threat to the government.

It was Nisar’s Pakistan Muslim League-Nawaz (PML-N) party that put the government on a three-day notice for agreeing to a set of demands, including an immediate withdrawal of petroleum price hike.

“The path of consensus leads to betterment. Let’s tread it together so that we could fight those ridiculing politicians,” Nisar said in a statement that signaled his party’s willingness to give the government some breathing space.

Gilani spoke to the house after his economic team briefed parliamentary leaders of all political parties on the current economic situation of the country, with special reference to petroleum prices.

It was perhaps for the first time in recent history that an official decision was reversed after pressure by opposition parties and the public.

The government had to face a barrage of criticism from political opponents across the country when it raised prices for different petroleum product by up to nine per cent.

Last week, the government’s largest ally in the centre, the Muttahida Qaumi Movement (MQM), decided to join the opposition after months of political wrangling. The party cited the price rise as the main reason for quitting the coalition.

Gilani said a parliamentary committee will be formed to make suggestions about how the government can deal with increasing petroleum prices in international markets.

Published in The Express Tribune, January 7th, 2011.


Sudhir K. | 12 years ago | Reply It was quite unnecessary for Pakistani PM to hike the petroleum prices. A little grumbling about the 'real' cost of 'War on terror' would have forced the American Sugar Daddies to open their coffers to Pakistan. I think a near-bankrupt USA is borrowing money from China & pouring it into Pakistan. So Pakistan is indirectly getting its 'aid' from PRC. So blackmail USA & get money for Pakistan!
IZ | 12 years ago | Reply @Ali - whether or not there should ever be a subsidy can be debated, but the point is that the subsidy has to be paid for. Currently the government cannot pay for it, so there is no point in the debate. As was pointed out by various economists, the govt is going to borrow massively from the state bank to pay for this subsidy which is going to cause all-round inflation. That inflation is going to hit everyone, but will hit the poor disproportionately, while an increase in petrol prices would have placed a proportionately higher burden on car owners (i.e. upper middle and upper class). You are entirely correct that this move makes the poor subsidize the rich which for some reason is seen as a good thing in this strange country.
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