'Raised oil prices burden to stay in Pakistan'
Pakistan Times Monitoring Desk

ISLAMABAD: The Finance Ministry believes that the international oil prices will remain in the range of $50 to $60 per barrel in the international market and thus consumers will have to continue sharing the price-hike burden, an official told The Nation.

“Consumers will have to share this burden as there is no chance in sight of reduction in oil prices and also because there is no other option,” a Finance Ministry official said on Sunday.

The ministry has started defending its decision to pass on the burden of oil price hike to the consumers, saying that the government has not passed the whole price rise on to the low-income groups who use kerosene and diesel. It is of the view that significant increase was made in the prices of petrol because wealthy people use it.

The official made comparison between international oil prices on basis of per barrel in dollars and per litre in Pakistani rupees.

Comparison

As he says, the kerosene prices in international market were $40.60 per barrel on May 1, 2004, which touched $61.07 per barrel on March 15, 2005, registering an increase of 51 per cent. While kerosene prices in Pakistan stood at Rs 24 per litre on May 1, 2004, which increased to Rs 28 per litre on March 15, 2005, showing an increase of 17 per cent.

For diesel, the international rate was $37.55 per barrel on May 1, 2004, which jumped to $ 57.87 per barrel as on March 15, 2005, registering an increase of 54 per cent. While in Pakistan diesel prices stood at Rs 24.37 per litre on May 1, 2004 and it touched Rs 29.06 on March 15, 2005, indicating an increase of 19 per cent.

“The government has not passed the whole burden on to the consumers and it has taken hit of billions of rupees on its budgetary target,” he said.

The international petrol price was $32.96 per barrel on May 1, 2004 and it touched $45.01 per barrel on March 1, 2005, registering an increase of 37 per cent. While the petrol prices in Pakistan stood at Rs 36.92 per litre and it increased to the level of Rs 45.53 on March 14, 2005, registering an increase of 23 per cent.

The official said if the government shifted the whole burden to consumers, the kerosene prices could touch Rs 36.24 per litre against the present Rs 28 per litre. The government has taken budgetary hit of Rs 8 per litre, he explained.

About diesel prices, he said if the government decided to pass on the whole burden, the prices could surge to Rs 36.80 per litre against the existing prices of Rs 29.06 per litre. It shows that the government has taken Rs 7.74 per litre budgetary hit.

Of the Petrol

In case of sharing full burden on petrol side, the price could touch Rs 50.58 per litre against the current Rs 45.53 per litre and the government is bearing Rs 5.50 per litre budgetary hit.

Comparing the POL prices in the country with India, the official said the petrol was cheap by 20 to 35 per cent in Pakistan. The petrol prices in Delhi stood at Rs 51.87 per litre, Bangalore Rs 59.26 per litre, Chennai Rs 56.54 per litre and Calcutta Rs 56.05 per litre.

The diesel prices in Delhi stood at Rs 36.02 per litre, Mumbai Rs 45, Chennai Rs 40.16 and Calcutta Rs 39.32 per litre. The diesel prices were cheaper by 27 to 60 per cent keeping in view different cities of India in comparison with Pakistan where uniform prices are charged in whole country.

The official said the government generates 7 per cent tax out of its total revenue through taxation on POL products while the worldwide average stands at 23 per cent.

The oil import bill stands at $1869.8 million in July-December period of the current fiscal year against $1355.7 million in the same period of the previous fiscal year.

The country’s oil import bill is bound to cross $4 billion mark this fiscal against $2.27 billion in last financial year.

“The total international oil demand stands at 83.4 million barrels per day against the supply of 72 million barrels per day thus demand-supply gap will certainly keep pressure on prices,” the official said.

There is no chance of increase in oil supply as OPEC share stands at only 25 million barrel per day and Non-OPEC countries like Norway are the major oil suppliers in the international market, the official added.

Recap

The government had frozen oil prices for seven and a half months from May 1, 2004 and it caused budgetary hit of Rs 40 billion.

During these seven months, the Finance Ministry big-wigs predicted the higher oil prices as temporary phenomena but now they were conceding that the higher oil prices would remain there and that there was no early chance of reduction in oil prices.●