EDITORIAL: Petroleum prices dilemma - Wednesday, March 02, 2011

Source : http://dailytimes.com.pk/default.asp?page=2011\03\02\story_2-3-2011_pg3_1

The political commotion over the recent increase in prices of petroleum products has put the PPP-led government in a very difficult situation. If it withdraws this increase, it faces the spectre of a yawning fiscal deficit and failure to meet international financial institutions’ conditionalities for loans. And if it does not, it faces a hostile political reaction, which will further weaken its already weak position after the PPP’s ouster from the coalition in Punjab. Like in January, when the government was ultimately forced to withdraw oil prices as part of its efforts to implement PML-N’s 10-point agenda, response from the entire political spectrum has been very negative. The PML-N, PTI and JI have openly expressed their displeasure, while the PPP’s coalition partner, the MQM, not only rejected Oil and Gas Regulatory Authority’s (OGRA’s) decision, it has given the government three days to withdraw the raise. Granted that the hike in prices of petroleum products will have a cumulative effect on the prices of all other commodities and further burden the public, nevertheless, it is very difficult for the government to avoid this raise in view of the hike in international markets. Political crisis in the Middle East has affected oil supplies from countries like Egypt and Libya and disturbed the balance of demand and supply, inducing inflationary trends in oil markets. Pakistan has linked domestic prices of petroleum products with those in the international markets. If in coming months, international rates decline, OGRA will automatically revise the price accordingly in its monthly review. However, it is more likely that rival parties would not listen to this logic and try to take advantage of the PPP’s difficult position. It is not just Pakistan’s government that is facing this dilemma; other countries too are calculating the risks of the gap in demand and supply of petroleum. After disruption of oil supplies from Libya, Saudi Arabia has pledged to boost production, but it will take some days before it could stabilise the market. Also, there is no guarantee that this will continue in the long-term if the situation so demands. A country like Pakistan, with the economy teetering on the brink, has few choices.

In addition to increasing prices of various petroleum products, such as motor spirit, kerosene, high speed diesel, light diesel oil, high octane blending content, etc, by 9.9 percent, the government has also increased the rate of petroleum levy in a bid to raise revenues. This is where the trap lies because opponents of this move argue that instead of taxing petroleum products, which constitute almost 50 percent of the pump price, the government should check corruption in its ranks and collect revenue from alternate sources. In fact, the ‘subsidy’ on petroleum prices is a misnomer, because when the government does not collect a certain tax on petroleum products, it is called subsidy. However, we have to admit that this is an inescapable reality. The government cannot survive without imposing these taxes. The situation has been complicated due to protests by Pakistan Petroleum Dealers Association against reduction in the margin of their commission in sales. PML-N chief Nawaz Sharif has threatened to launch another long march and might use the increase in petroleum prices as a plank to launch his anti-government movement. Politically, the government is stuck and if not handled carefully, the situation might explode. *

SECOND EDITORIAL: Excuses galore

Prime Minister Yousaf Raza Gilani said on Monday that foreign powers and elements were involved in Balochistan and Pakistan has solid evidence to that effect. Mr Gilani’s statement about the involvement of ‘foreign hand’ in Balochistan is akin to undermining the struggle by the Baloch people against decades of state oppression. Instead of addressing the genuine grievances of the Baloch, Prime Minister Gilani is hiding behind the usual excuse. Mr Gilani, and all those who allege that the Baloch insurgency is funded by external powers, should put their money where their mouth is. The promised evidence, which has been doing the rounds ever since Mr Gilani’s meeting with Indian Prime Minister Manmohan Singh at Sharm el-Sheikh, has still not materialised. Mere assertions to this fact are less than convincing since we have not seen a shred of such evidence. It is time that this so-called evidence is shown to India and the people of Pakistan. If there is no such evidence, which is more likely, then the government should stick to facts and address the issues at hand.

Balochistan is in turmoil once again. Lawyers in Balochistan boycotted court proceedings on Monday to protest the kidnapping of judges and lawyers. The legal fraternity seems to be the newest targets of assailants in Balochistan. This is something new and dangerous. Sibi District and Sessions Judge Jan Muhammad Gohar Yasinzai and Balochistan Bar President civil judge Muhammad Ali Kakar were kidnapped by unknown men recently. Four senior lawyers were also kidnapped before these two judges. Some legal analysts are of the opinion that these new developments are related to the restoration of the Sibi Circuit Bench of the Balochistan High Court and the unhappiness of our security establishment at its restoration. If this is true, then there is more cause for worry. No institution of state should be held hostage to the whims and fancies of our security establishment.

Prime Minister Gilani expressed his concern at the kidnappings and said, “We invite their [Baloch] leadership (for dialogue) and we are ready for talks”. The solution to the Balochistan imbroglio lies in dialogue and not the use of force. The democratically elected government must initiate a political dialogue before the situation gets out of control. *

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