A big shock

ISLAMABAD: A massive rise of Rs 12/litre in the price of petrol has come as a big shock to van driver Atiq Khan, who provides a pick-and-drop service to school children.

Atiq Khan said he raised transport costs last month, but the recent rise in petrol prices has made it much more difficult for him.

“Last month, I increased the transport fee by Rs 500/child, but even for that I met resistance from parents and now I don’t know how to convince them again for another increase,” a- he declared.

Atiq mainly provides a pick-and-drop service to middle and lower middle class students. Due to inflationary pressures, some of its customers are now using Bykeaa motorcycle service, to pick up and drop off their children.

“Parents understand that sending their kids on bikes is a bit risky, but they have no other choice and we can’t blame them for abandoning our services,” Atiq said.

Karachi Retail Grocers Group (KRGG) General Secretary Farid Qureshi has said that the recent rise in oil prices will increase the prices of all items by around 15%.

“The average transport cost of a 40kg packed item is likely to increase by Rs50 and as a result, wages for shippers will also increase,” he said, adding that local and multinational companies had, in the recent past, increased packaged prices. elements.

Edible oil makers and flour mills are also considering raising prices as importing raw materials hurts their businesses, he said.

It has been observed that edible oil companies buy substandard Iranian cooking oil from the market, which is smuggled into the country to meet their needs.

“The cost of Iranian oil is Rs 200/kg but they [edible oil companies] sell it at Rs350/kg and even indicated to increase it further by Rs50/kg due to high petrol prices,” he added.

Flour mills are also asking the government to raise flour prices.

Former KCCI vice president and commodity expert Shamsul Islam said that in developed countries prices are determined by demand and supply, but in Pakistan, due to poor administration and poor governance, mafias from different sectors manipulate prices.

“Despite a 6-7% increase in diesel prices, carriers can increase the rate by 10-12% and unfortunately no one in the federal or provincial governments can control that,” Islam said.

The government along with all the regulators and the business community have determined the inland freight so that no one is manipulating the rates, he said.

“You have to understand that in many countries production has stalled because of the Covid-19 pandemic, but now it’s picking up again,” he said. For Islam, there is a huge demand for crude oil from countries like China and India.

Despite Prime Minister Imran Khan’s initial reluctance to raise oil prices, the government was forced to raise tariffs from Rs10 to Rs12/litre for the next fortnight, ending February 28, to pass on the impact of the rise in international oil prices and the application of additional oil tax measures, as committed to the International Monetary Fund.

In a tweet, Finance Minister Shaukat Tarin said that due to rising international oil prices, Pakistan is suffering huge losses in revenue from sales tax and oil tax.

“Following the 166% increase in international oil prices since November 2020, the government is continuously losing revenue generated from sales tax and oil tax, just to protect the common man from rising prices. In FY22 alone, the government lost Rs 70 billion per month and Rs 840 billion for the full year,” he added.

These are the highest prices of all products and possibly also the biggest increase in their prices in one go.

The Ministry of Finance announced the decision after convincing the Prime Minister to increase the oil tax on all products by Rs4/litre to honor the commitment made with the IMF. However, the General Sales Tax (GST) rate on all of these products remained unchanged at zero.

Benchmark crude prices are hovering above $100/barrel on the international market.

A statement issued by the authorities indicates that the Prime Minister has approved the recommendation to increase the prices of petroleum products in line with the development of international oil prices.

According to a notification issued by the Ministry of Finance, the ex-deposit price of petrol was set at 159.86 rupees, down from 147.83 rupees/litre, up from 12.03 rupees/litre, or 8.14 %. Petroleum tax on petrol has been increased from Rs13.92 to Rs17.92/litre. The government also charges around Rs 12/litre on petrol as a customs duty.

The ex-depot price of High Speed ​​Diesel (HSD) has risen from Rs 144.62 to Rs 154.15/litre, an increase of Rs 9.53/litre or 6.6%. Petroleum tax on HSD has been increased from Rs 9.30 to Rs 13.30/litre in addition to customs duties of Rs 12/litre.

The ex-depot price of kerosene rose from Rs 116.48 to Rs 126.56/litre, up by Rs 10.08 or 8.65%. Petroleum tax on kerosene has been increased from Re1 to Rs5/litre.

The ex-deposit price of light diesel (LDO) also increased from Rs 114.54 to Rs 123.97, registering an increase of Rs 9.43 or 8.23%. The oil tax on the LDO has been raised to Rs9.50/litre from Rs5.50.

All kerosene prices have also been increased. The price of JP-1 has been increased by Rs11/litre to Rs140.65, while the price of JP-8 has increased by Rs7/litre to Rs135.72. E-10 (Ethanol Gasoline) fuel has also increased by Rs10/litre to Rs157.35. These three products also contain 17 percent GST but no petroleum levy.

Announcing the price hike, the Ministry of Finance said the prices of petroleum products were showing a drastic increase in the international market and were at the highest level since 2014, when crude oil hit $105 a barrel.

Interestingly, the domestic prices of petrol and HSD in 2014 fluctuated between Rs110 and Rs120/litre.

Pakistan Kuwait Investment Company Research Director Samiullah Tariq said that this time oil prices hit an all-time high due to the massive depreciation of the rupee.

The weight of oil production in the consumer price index (CPI), which is a reference inflation, is 4%.

“This recent hike alone will add 0.4% inflation to the CPI, but if you look at the side effects, it is very high because everything will be impacted by an increase in transport costs,” he said. -he declares.

Oil Tankers Association Secretary General Nauman Butt said they have also demanded an increase in their tariffs from the Oil and Gas Regulatory Authority (Ogra) and Pakistan State Oil (PSO).

“Tanker owners have already set up a protest camp at PSO headquarters in Karachi.” However, he refused to quantify the increase they were demanding from the two organizations.

“As the talks with the authorities are in the final stages, we don’t want to send the wrong message or disrupt the momentum of the talks, but once things are finalized, we will certainly share the details with the media,” he said. -he adds.

The prime minister postponed the price review until January 31 and relieved consumers by cutting GST and PDL and was bearing a revenue loss of about Rs 35 billion every fortnight, he said.

Currently, GST is zero on all key products including gasoline, HSD, kerosene and LDO, compared to 17% normal GST. The government imposes an oil tax of Rs17.92/litre on petrol, Rs13.30 on HSD, Rs9.50 on LDO, Rs5 on kerosene and Rs30/litre on high octane blend components. The government also charges around Rs 12/litre for petrol and HSD duty.

Pakistan’s oil import bill hit a record high of $11.69 billion in the first seven months (July-January) of the current financial year 2021/22, mainly due to a price spike energy on the world market and partly due to a recovery in demand.

The price of Arab light oil, which Pakistan mainly imports from Middle Eastern countries, jumped 74% year-on-year during the review period.

The volumetric demand for petroleum products increased by 25% in Pakistan. As a result, the share of energy in the country’s total import bill increased to 25% in July-January FY22 from less than 20% in the same period last FY2020/21.