The capping of oil prices by the Imran Khan
government towards the end of its tenure — at a heavy subsidy of around Rs150
billion per month — is seen by the present government as a booby trap that was
laid to sabotage the Shehbaz Sharif-led present administration.

An official source said that the huge oil subsidy is a major cause
of concern for the new government, which is finding it hard to undo the capping
of the oil price and end the subsidy on oil. If the subsidy continues and the
government does not raise the oil price, it will cost the country even more
than the defence budget.

No budgeting could possibly be done with an over Rs150 billion
subsidy on oil alone, the source said, adding that if the oil price is raised
as per international market rates, the price of petroleum products would shoot
up in the country, inviting strong public reaction. For the new government,
it’s like being between the devil and the deep blue sea.

“We are praying for an early decline in the international oil
price,” the source said, warning that the IMF would never accept such a huge
subsidy on oil. He said that everybody knows that the IMF programme is a must
to get the country out of the present economic mess.

When approached, former Prime Minister Shahid Khaqan Abbasi, who
is said to have briefed Prime Minister Shehbaz Sharif on the oil-related
financial crisis, told The News that petrol costs the government
Rs171 per litre whereas it is sold at around Rs150 per litre. Diesel costs the
government around Rs196 per litre but is sold at Rs144 per litre.

Abbasi said that as per the commitment of the Imran Khan
government with the IMF, the price of petrol per litre needs to be Rs235
whereas the government is bound to increase the diesel price to Rs264 per
litre. Abbasi said that no country could afford to pay such a big subsidy on
oil products.

It is still not clear how the government would tackle this
problem, but the petrol price problem is considered the most pressing issue
left by the Imran Khan administration for the Shehbaz Sharif government. It is
believed that the present government would have to raise the price of oil
products incrementally. Increasing petrol prices mean a more severe price hike
and more inflation. This will badly hurt the popularity of the incumbent prime
minister and the PML-N in particular, which in return would benefit the PTI and
Imran Khan.

Imran Khan’s finance minister Shaukat Tareen when approached said
that nothing unwise was done by the then government to cap oil prices till next
budget. He explained that the finance ministry had reallocated resources from
different heads to generate around Rs456 billion to subsidize oil prices till
June this year.

He admitted that international oil prices shot up more than what
was expected but he said that it was all manageable. He said that the
government initially wanted to give a targeted oil subsidy but there was no
mechanism available to make this possible. Therefore, it was decided to give
the oil subsidy across the board.

 

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2022-04-19

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