The rise in the international price of oil led to an automatic upward adjustment in the domestic price of oil through a notification issued by the Oil and Gas Regulatory Authority. The general public has, by and large, blamed the federal government for this rise, and some have gone a step further and accused the government of deliberately and maliciously attempting to further erode real incomes in this country and to have timed it to have the worst possible impact on the common man in the aftermath of Eid.
However, emotions aside, it is relevant to note that a rise in the international price of oil during the winter months is linked to a traditional increase in demand during the winter by Western countries, coupled with the fact that it is no longer economically feasible for the government of Pakistan to subsidise oil prices. Or, in other words, factors beyond the control of the government are responsible for the most recent raise in oil prices in the country.
Critics of the government would, no doubt, argue that poor governance has played a pivotal role in the state of the economy with rising food prices attributed to the proliferation of cartels and smuggling across the eastern and western borders, as well as the lack of action on forward planning to ensure that expected deficiencies in the infrastructure sector in the future are tackled through the timely launch of appropriate projects.
While a major portion of the blame does rest with the Musharraf administration for not investing adequately for the future, especially in the energy sector, yet it is only fair to hold the present federal government accountable - in power for over a year and a half - for ongoing poor governance. Some critical questions need to be raised and the federal government needs to respond to them.
Why is the energy sector still grappling with the issue of inter-circular debt, after it was not only acknowledged as a major issue responsible for the power crisis by the government, but it also committed to eliminating it a year ago? Why does heavy reliance on oil and products as a major input for energy generation continue? There is talk of launching energy sector projects that envisage the use of domestic coal as a major input.
However, there appears to be little activity in real terms in this regard. To argue that scarce government resources and the current law and order situation in the country militates against the inflow of foreign investment maybe relevant, but only to the extent that the government has not made a realistic offer to foreign investors - an offer that takes note of the problems associated with investing in infrastructure sectors in this country.
Additionally, the perception that there is corruption and nepotism in the award of contracts needs to be taken into account, prior to making a reasonable offer to international investors that has the possibility of success. The government must accept one basic fact: that Pakistan is not the only destination for foreign direct investment in the world. And for success it is important to accept the existence of some politically embarrassing elements that need to be taken into account when formulating a policy to attract investment.
That has been sorely lacking to date. Thus the federal government needs to not only harp on the fact that economic returns from investing in our energy sector would be much higher than anywhere in the world, but also enact laws that would extend heavy penalties against any government ministry/department that defies Public Procurement Regulatory Authority rules, as well as insist on the release to the media of anyone found guilty of using undue influence to award a contract.
This would increase both foreign and domestic investment, which would lubricate the wheels of the economy that together with a less anomalous tax system, may well enhance the government's capacity to extend subsidies to the general public in difficult times.