WPI – refusing to budge

Such are the times that a 24 percent year-on-year increase in wholesale price index (WPI) is being viewed as a breather. The full context makes things easier. This 24 percent increase is coming off the highest-ever recorded increase of 41 percent in WPI last August. While the peak may well and truly be behind us – but there appears a lot more distance before a trough of any sort can be seen.

On a sequential basis, things start to become clearer, as WPI inched up 4.2 percent – highest month-on-month increase in many a month. Just like the retail price readings, the PBS seems to have substantially mistreated power tariff increase. A negative 1 percent year-on-year change in industrial tariff is what the PBS reports. What wouldn’t commercial and industrial entities give for this to be actually reflected in their bills. No matter the size of fuel adjustments, there is no way tariffs have gone down year-on-year – for anyone.

More so for the industries – as government has withdrawn every single concession on power tariffs from general industries to zero-rated. That alone accounts for more increase than what the PBS had shown last month at 30 percent. There is no way tariffs from July 2022 only went 30 percent higher for industries – given exemption of concessions and a whole variety of duties, surcharges, taxes, and more taxes.

But PBS’s failure to record the correct increase in electricity price does not mean the second-round effects of higher power bills can be stemmed. It will not be long before the transmission mechanism to retail prices comes into play. Mind you, diesel prices have also reached a new high and transportation charges will be adjusted upwards. The metal and machine category has been showing a massive increase month after month – and that is going to be reflected in the output prices, sooner than later. Even for the agriculture sector, all subsidies on tube well electricity have been abolished, which has nearly tripled the cost – and that will also become a pass on.

As Brent oil touched $90/bbl in yesterday’s trading –alarm bells must have rung in Islamabad. The last thing Pakistan can afford in the middle of what is probably its worst economic crisis – is another commodity boom cycle. The currency depreciation will start reflecting in wholesale prices from August onwards – and with ever rising energy prices – more misery seems to be in store for the commoner.