Daily Times

It seems that the trend of declining fuel prices has bottomed out and the situation is going to reverse now. Reportedly, the government is all set to jack up the prices of petrol, oil and lubricants (POL) from March 1in the wake of recommendations forwarded by the Oil and Gas Regulatory Authority (OGRA). It will be the first hike since the imposition of an unprecedented general sales tax (GST) of 27 percent on POL products. Despite a strong protest by the opposition parties, the government violated the constitution and imposed an additional GST of 10 percent through an executive order. The imposition of taxes is the domain of parliament but the government has done it thorough an administrative decision while ignoring the necessary parliamentary process. Presently, the rate of GST and excise duty in Pakistan is the highest in the region. There is no logical justification for such an increase. Possibly, the government is perturbed to meet the ambitious revenue targets, which have been set on the instructions of the International Monetary Fund. Amid declining foreign exchange reserves, the sale of POL is a cash cow for the Ministry of Finance as 25 percent revenue comes from the oil and gas sector. The government supports an exorbitant increase in GST in order to keep the budget on track. This is not a strong argument because an increase in demand has already offset this shortfall and there is no reason to withhold the complete benefit of a fall in oil prices.

During the last three months, fuel prices have decreased by almost 40 percent but the impact of this huge reduction has not been witnessed on the inflation rate. No considerable cut in the prices of daily use commodities and transportation fares has been in evidence. However, the expected increase in POL prices might trigger a new wave of inflation. Moreover, the government is still unclear under what circumstances and conditions it will take back the unjustified high rate of GST. The government must be aware that the masses have become more conscious of their problems due to the active role of mass media and they can stand up against this injustice. The rulers must look for other means for raising cash and meeting revenue targets instead of burdening the masses with more taxes. The government needs to reduce its unnecessary expenditures and take austerity measures. Despite the fact that shortfall of revenue has been offset due to surge in demand, the Finance Ministry is reluctant to pass on the full relief to the masses, which might prove detrimental to the government’s efforts to win the people’s trust. *