Pakistan government gave a late Eid gift to the people by reducing petrol price by Rs. 1.5 per liter. The price of petrol after reduction now stands at Rs. 72.80 per litre, which is one of the cheapest petrol prices ever prevailed in the region. Another thing to note here is that the petrol that is being sold in the country is of better quality as compared to that in other regions.
There has been an increase of 64% in the petroleum prices in between February 2016 to March 2017. However, Pakistan petroleum prices only witnessed an increase of 2.3% in the previous months which shows that the government continued to absorb the price hike while passing on financial relief to the people. Another scenario is that the petroleum prices in Pakistan were already at higher level and thus increase in the prices was not needed.
While price of petroleum in Pakistan only increased by 2.3%, neighboring countries like India increased prices by 22.7% during the same time. Other oil importing countries also increased their prices by 9-40%. Oil importing countries like Pakistan, India, and others have benefitted from decrease in the prices of crude oil globally over the last few years.
While the impact of increased Petroleum prices has not passed on to the people, government of Pakistan has ensured that this move keeps the inflation in check. It is pertinent to note that the government succeeded in its efforts to keep the inflation in control as inflation during the first 11 months of fiscal year 2016-17 was 4.18%. Increase in petroleum prices would have pushed the inflation rate up as increase in petroleum prices has an impact on the prices of almost all the commodities.
Oil is a major commodity for Pakistan as a lot of industries are dependent on it to run their operations. This is another reason why the government is not keen to increase oil prices and keep them stable at the current level. Because increased oil prices would mean an increase in the prices of goods that could trigger an increase in inflation, this is not what the government wants right now ahead of the 2018 General Elections.
Price of electricity would have gone up, had the oil prices increased in Pakistan. And the people of Pakistan for now cannot afford to absorb an increase in electricity price that is already sky rocketing. State Bank of Pakistan (SBP) in its latest report ‘State of the Economy’ stated that the government has passed little impact of increased oil prices due to political economy dimension with general elections.
While the government has not passed on any impact of increased petroleum prices to the general public, it may do so in the near future sighting reasons of providing better quality fuel to public. And it is a general phenomenon known to everyone that if you want to get the best product, you need to pay a higher price for it.