FeaturedNationalVOLUME 17 ISSUE # 40

Inflation at a historic high

Inflation in Pakistan skyrocketed to 42.3pc on a year-on-year basis in August. Protests against inflated power bills are feared to intensify after the government has hiked the electricity tariff by Rs9.90 per unit on account of monthly fuel charges adjustment. Rates of petrol and diesel will also go up under an agreement with the International Monetary Fund. It means that prices of food and essentials will increase further in the days to come to pile up misery on the common people.

Ironically, all these steps have been taken by a government which has come to power on the promise to reduce prices. The coalition parties had also held a “Mehngai March” against the Imran Khan government. However, it has taken measures which have hit even them harder. People were suffering badly in the PTI government when the inflation rate was 13-16pc. It made headlines in the national media when the price of naan and roti surged to Rs12 and Rs10 from Rs10 and Rs8, respectively. Now, roti sells at Rs15 and naan at Rs20, but there is no mention of it in the mainstream media.

According to data released by the Pakistan Bureau of Statistics (PBS), the sensitive price index (SPI) registered a record increase in inflation at 42.3pc on a year-on-year basis in August. The SPI for the week which ended on August 18 recorded an increase of 3.35pc with hikes in prices of 25 items. The year-on-year trend depicted an increase of 42.31pc, primarily due to an increase in masoor (111.02pc), diesel (108.77pc), petrol (94.53pc), onions (94.43pc), cooking oil (72.96pc), mustard oil (71.08 pc), chicken (69.04pc), vegetable ghee (68.56pc) and electricity (63.03pc).

On the other hand, the National Electric Power Regulatory Authority (Nepra) has approved an increase of Rs9.90 per unit on account of monthly fuel charges adjustment (FCA) for power distribution companies. Earlier, the power companies had charged Rs7.91 per unit on account of the monthly charges in May. The companies will charge Rs1.99 per unit more from consumers in August. It will be applicable to consumers of all power distribution companies except lifeline customers. It will also not apply to K-Electric consumers. Despite the rising tariff, worst power outages continue across the country.

As prices of fuel continue to decrease in the international market, the coalition government has continuously increased them. It only decreased their prices ahead of Punjab by-polls to woo voters, but the trick did not work. Since then it has increased fuel rates fortnightly. On August 16, the rate of petrol and light diesel oil (LDO) was increased by Rs6.72 and 43 paisa per litre, respectively. On the other hand, prices of high speed diesel (HSD) and kerosene were cut by 51 paisa and Rs1.67 per litre, respectively. “In the wake of fluctuations in petroleum prices in the international market and exchange rate variation, the government has decided to revise the existing prices of petroleum products to pass on the impact to consumers,” the ministry of finance said in a statement. As such, the ex-depot price of petrol was raised to Rs233.91 from Rs227.19, an increase of Rs6.72 per litre, or 3pc. The price of light diesel oil inched up by 43 paisa per litre to Rs191.75 per litre from Rs191.32.

The government is charging a petroleum development levy of Rs20 per litre on petrol and Rs10 each on HSD, kerosene and light diesel oil (LDO) in line with its commitment with the IMF. On August 1, the government had increased the price of HSD and kerosene by Rs9 and Rs5 per litre, respectively, and reduced petrol by Rs3 per litre. Earlier on July 14, Prime Minister Shehbaz Sharif had announced a reduction of Rs18 to 40 per litre in the prices of various products, ahead of by-polls in Punjab. It was the first time the PMLN-led coalition government had reduced petroleum prices after it came to power in the second week of April. Between May 26 and July 1, the petrol price had risen by 66pc, or Rs99 per litre, while HSD rates went up by 92pc since May 26 from Rs144.15 per litre, up by 132.39 per litre. Likewise, the ex-depot price of kerosene had gone up to Rs230.26 per liter, up by 95pc between May 26 and July 1. Similarly, the ex-depot price of LDO went up to Rs226.15 on July 1, up 80pc from Rs125.56 per litre on May 26, up by about Rs100.59 per litre.

Petrol prices in Pakistan are expected to increase further as the government has decided to impose an additional Petroleum Levy from September 2022 after it reached an agreement with the IMF for the restoration of the $6 billion loan programme. The government has sent a Letter of Intent to the IMF – after it was signed by Prime Minister Shehbaz Sharif and Finance Minister Miftah Ismail – which assured it that Pakistan would impose an additional Petroleum Levy (PL) in a phase-wise manner until it reaches Rs50 per litre. The Petroleum Levy (PL) on petrol is expected to increase by Rs10 from September 1, which is going to take the total amount of the levy on the commodity to Rs. 30 per litre, while the levy on diesel will increase by Rs5 to a total of Rs15/litre. The hike in the Petroleum Levy will result in a massive increase in petrol prices in Pakistan in the coming months.

The government aims to introduce more reforms in the next few months. It means there is no prospect of relief for the people anytime soon and they will continue to suffer.