September 24, 2023

Possible increase in petrol price, what options does the government have?

Dr. Sajid Amin suggested that the government should devise a system of targeted subsidy of petroleum products to avoid public criticism and improve its public image.

Petrol price

The Oil and Gas Regulatory Authority has once again sent a summary of the rise in prices of petroleum products to the government. Economists say that even if the government does not eliminate subsidies on petroleum products, it is difficult to avoid inflation at this time. The gradual elimination of subsidies and targeted subsidies are beneficial for the public and national economy.

If the increase in prices by the government or the subsidy given by the previous government on petroleum products is abolished, not only petroleum products will become more expensive but also the prices of other essential commodities are likely to increase.

According to economists, the non-increase in prices will disrupt the affairs of the IMF and other institutions and the non-arrival of more funds in the national treasury will continue to increase the value of the dollar. Due to this, the rate of inflation will increase in the same way as the increase in prices.

According to officials, the Oil and Gas Regulatory Authority (OGRA) has advised the government to phase out subsidies on petroleum products. The summary sent to the government suggested eliminating subsidies and raising prices. A decision on OGRA’s proposal to increase prices is expected on Sunday.

According to government sources, the subsidy on petroleum products could be phased out. At present, the government gives a subsidy of Rs 29.60 per liter of petrol and from May 16, the subsidy on petrol will increase to Rs 45.14 per liter.

If all the subsidies are abolished then petrol will have to be increased by Rs 45.15 per liter, as a result of which petrol may be Rs 195 per liter. Similarly, the subsidy on diesel is Rs 73.4 per liter and from May 16 the subsidy on diesel will reach Rs 85.85 per liter. With the abolition of subsidy, the price of diesel will go up to Rs 230 per liter.

Federal Information Minister Maryam Aurangzeb has hinted at an increase in the prices of petroleum products, saying that “former Prime Minister Imran Khan illegally subsidized petroleum products without the approval of the Cabinet and the ECC.”

Now the question is that if the government does not end the subsidy on petroleum products then the country’s economy cannot afford to bear its burden and if it takes a bitter decision then the new government’s statement to end inflation will die down and they You have to carry the burden on your shoulders. In that case, what options does the government have?

In this regard, the former caretaker finance minister and economist Dr. Hafeez Pasha while talking to Urdu News said, There is a burden of Rs 100 billion. This will result in more borrowing and will lead to higher inflation in other ways. The second is that talks with the IMF are underway and there is a meeting in Doha on May 18 to discuss the implementation of the talks in Washington and on the same implementation the Seventh Review and the I.P. Depending on the expansion of the MF program.

“We have had very good talks with the IMF, but we have not done anything about it yet,” he said. Therefore, if the subsidy is not removed, the IF program will be jeopardized. Now it is up to the government to decide what to do. “

Responding to a question, Dr. Hafeez Pasha said, “The government can temporarily avoid public criticism by not eliminating subsidies, but when the IMF program is affected and the inflow of money from abroad stops, the country’s economy and Inflation will have the same fate as the price hike now because the rupee will continue to depreciate.

“The government has two options at the moment, to phase out subsidies and in the meantime continue negotiations with the IMF, and money will start coming in from outside, which is still stalled,” he said. That they should be prepared for inflation in any case. It is impossible to avoid it at this time.

Another economist, Dr. Sajid Amin, told Urdu News that the previous government had made an economically wrong, irrational and political decision by freezing petroleum products. Changing these prices will definitely lead to inflation. However, the current government has the option to avoid its full impact. One thing the government can do is to increase it in stages. In the first phase, only the amount which was reduced by Rs. 10 from the original price should be increased and the original price should be gradually restored in the next two months.

Dr. Sajid Amin suggested that the government should devise a system of targeted subsidy of petroleum products to avoid public criticism and improve its public image. The mechanism is that if half of the monthly subsidy of Rs 96 billion on petroleum products is given to the beneficiaries of the Benazir Income Support Program, their purchasing power can be improved. The IMF or any other international body will not object to this. Targeted subsidies have always been in the public interest.

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