Petroleum pricing folly

Just as every increase in petroleum prices should not be termed a ‘petrol bomb on masses’ similarly every time the prices are not increases must not be confused with government absorbing losses and offering subsidy to the common man. The January petroleum product pricing bordered on the ridiculous, with diesel prices being slashed by Rs3 per liter, whereas that of motor gasoline was kept unchanged.
The average oil price in the global market fell by 13 percent, during the reference pricing period. The currency was relatively stable, and even if one accounts for 1-2 percent depreciation, the overall impact should have been 10 percent on the lower side. What actually happened is baffling to say the least. That Ogra, had recommended in its summary to actually raise the price of petrol defies logic.
The Prime Minster mercifully rejected the Ogra’s summary and showered the masses by rewarding them with no change in price of petrol – in a time when oil in global market was at its eleven year low. Yes, the government has the prerogative to play around with taxes, especially when there is hardly an easier avenue to fill the pockets.
But to say that the move meant that the government took losses on its own book is plain and simple incorrect. For quite some time now, the government has been collecting the Petroleum Levy at the maximum rate, which is fair enough as base prices over the period have come down significantly. Meanwhile, GST on various products has gone up the roof – in the case of diesel as high as 51 percent.
There can be debate on whether depriving the consumers from a surplus is a good call or otherwise, but that must not be portrayed as a welfare step towards masses. Had GST stayed at the normal level of 17 percent, consumers would have been paying significantly lesser on petroleum products than what they are.
Agreed that the high tax incidence on petroleum products is not a Pakistan specific phenomenon, but using petrol prices as a tool for politicking is surely uncalled for.
The argument goes that you cannot justify the failure to pass on the benefit to the end user by simply saying that it is still lower on year-on-year terms. Mind you, commodity prices fall in tandem and the decline in exports is an outcome of that. The slowdown in earnings of multiple sectors surely means the masses deserved better than this. Yes, tax collection may well of prime importance. At least do not fool people saying we are bearing loss just for your interest.