Dear Readers.

Despite pre-election promises to bring down prices of essential commodities including atta (flour) and petroleum products, the coalition government, has instead, increased prices of petroleum products twice during its four-month tenure while atta prices escalated automatically. There are reports that petroleum prices will be further raised before the announcement of national budget, due in June this year.

The government is also claiming that it will pay over 150 billion rupees in subsidies on petroleum products to offset the impact of skyrocketing crude prices in the international market. Crude again crosses $ 126 a barrel in the international market.

As Pakistan enhanced prices of petroleum products, the neighbouring India, on the contrary, had reportedly reduced them. What’s the matter? Should we assume that India was getting crude at cheaper rates than Pakistan or India had recently made discovery of large oil reserves so that it does not need to depend on imported crude. If both assumptions are wrong than we have to believe that Indian government has sacrificed on some portion of taxes and levies from petroleum products.

Oil marketing companies and the experts had been suggesting the successive governments to reduce development surcharge and other levies on petroleum products to reduce the impact of rising international crude price.

OPEC, an organization of oil producing countries is also asking governments across the globe to cut taxes on petroleum products as this is the only way to save the common man from this shocked.

Economists believe that increase in oil prices has a multiple effect on the prices of other products as it raises the cost of production and renders less developed and developing countries uncompetitive in the international market.

Pakistan being one of the developing countries is facing the similar situation. Cost of production has been enhanced manifold in Pakistan in the last five years because of rising oil prices, seriously affecting export competitiveness among the countries of the region.
Our exports are falling after touching peak between 2004 and 2006, mainly due to high electricity, gas charges and bank’s mark up.

There is a need that the new government should reduce the rate of levies and taxes on petroleum products to bring down the overall cost of production and boost country’s exports. This is also the demand of business community and the common citizen. The government can make revenue from other unexplored sectors like tax on agriculture income or taxing luxury items.

At the same time, government should focus on exploiting other sources of energy to reduce dependence on imported oil. Time has come to use vast coal deposits in Thar and other parts of Pakistan to produce electricity and also meet industrial needs.
The early agreement on gas import from Iran or Turkmenistan can also help in reducing dependence on oil import.

Alternate energy is another mode to generate cheaper electricity.

Naeem Qureshi.