Why is it that a reduction in the prices of petrol and diesel does not give the required relief that the Pakistani public so desperately require? Namely, a reduction in the prices of our commodities. The numbers are certainly favourable considering the cut in prices from a high of Rs. 160 per litre to Rs. 150.35 per litre, but these low prices have been unable to turn around the declining fortunes of our petroleum importing nation?
Why is this? Should there not be some relief with the lower price? In a nutshell, this is the case for a few reasons, one being that there are costs associated with running an oil company (OPEC). These costs include the space for storage of fuel, the purchase and maintenance of refineries and transportation companies (trucking services). And then there are also some interests, such as remuneration from its members who have to pay membership fees every year. All of this cost’s money, and money is money.
There is then the issue of the external requirements (requirements which are not necessary for running the company but are helpful when it comes to profit) that oil companies have to meet. These include advertising, which can be quite costly. There is also a requirement for political backing. As we all know, the petroleum sector makes up a major part of our national economy and thus requires a large amount of political support. This includes donations and contributions to political parties.
As Pakistan’s oil is a very large industry and one of the most important industries in our country, it is up to the government to take action and decide how best to cut back on costs, which will eventually lead to a reduction in the prices of petroleum. The government has decided to do this by increasing taxes on petroleum. By doing this, the government will be able to reduce its financial expenses and thus be able to decrease its cost of production. Which will then mean that the government will be able to reduce the price of petrol and diesel.
Having touched upon the equipment available to the government for increasing or decreasing the prices of petrol, we need to understand that the government does issue price lists for commodities but rarely has the ability to implement those prices. Food inflation in Pakistan can be best tackled by the government implementing a system of government regulated cheaper markets which will enforce the purchase of foods at lower prices on certain days, but with the government unable to enforce such a system, this leaves us with the option of buying goods at prices intended by the seller rather than those regulated by the government.
The government can also increase (or decrease) prices by implementing tax policies as well as organising our market towards competition and more functional structures. Competition among distributors can be used to help control expenses and ultimately reduce prices, while increasing profits for all. Competition will also reduce supply costs.
It all boils down to the strength of the governments policies and their systems. Our sitting government has every intention of reforming our tax collection and thus extending welfare to the vast majority of the public, hence elevating the living standard of the common man. But, there are numerous obstacles, in this path of reform. We need to stand our ground and be hopeful, keep a keen eye on all current events and be objective than only in the mode of denial.