Govt absorbs Rs136bto protect consumers from oil prices hike

ISLAMABAD—Special Secretary Ministry of Finance Ministry, Dr. Ashfaque Hasan Khan said on Wednesday that since May 2004 until December 15, 2007, the government has taken a budgetary hit of Rs. 136 billion to protect the consumers specially the commonman from rising international oil prices. Talking to APP here , he said the government had linked domestic prices of oil with international prices of oil in 2001.
He said the government had started this linkage in the year 2001 as part of its structural reforms agenda. “This scheme continued and we kept our international linkage with international oil prices till April 2004”, he said . Dr.Ashfaque said in May 2004, the government de-linked the domestic prices of oil with international prices thinking that international price hike of oil could be a be a temporary phenomena and the government could protect the people by freezing the oil prices and taking hit in the budget.
“But international prices of oil kept on rising” , he remarked. Dr.Ashfaque said that in May 2004 until December 15, 2007, international prices of the oil went up by 172 percent, Diesel 179 percent and the Kerosine oil went up by 175 percent. Contrary to the fact, he said that domestic prices of petrol went up only by 45 percent, Diesel prices by 55 percent, and Kerosine oil prices were increased by 47 percent only.
The Special Secretary Ministry of Finance said that during this period the government has taken a budgetary hit of Rs. 136 billion. He said that the last adjustment was undertaken in January 16, 2007, while the government reduced the prices of petrol by Rs.4 per litre and Diesel by Rs.1 per litre. Dr.Ashfaque said that since May 2004, out of eighty eight (88) fortnights, the domestic oil prices remained unchanged for seventy eight (78) fortnights while nine (9) times the prices were increased and one time the prices were decreased.
Dr.Ashfaque said that since January 16, 2007 to December 15, 2007, the prices of crude oil in the international market increased by 76.4 percent but remained frozen in the domestic market. Prices of diesel , he said went up by 68.1 percent but remained frozen in the country. Similarly, he said the prices of Kerosine oil went up by 69.7 percent but the prices remained frozen in the country. He added that since July 2007 uptill now the government budget was hit by Rs.36 billion.
“If we do’nt do anything and the current international oil prices remained during the current financial year, the total budgetary hit could be Rs.150 billion”, Dr.Ashfaq Hassan Khan cautioned. He said that for provision of relief to commonman everymonth, the government is providing a subsidy of Rs.14.5 billion out of which Rs.13.5 billion per month on Diesel prices which is 93 percent of the total subsidy. Dr.Ashfaque Hasan Khan said that government is providing a subsidy of Rs.18.5 per litre on Kerosine oil and Rs.17.20 per litre on Diesel.
He said that if “we do not do anything then the budget deficit for the current fiscal year would rise by at least Rs.150 billion and the budget deficit would certainly exceed 4 percent of the GDP target. He said that the era of cheap energy and food is gone, the world has adjusted to the new environment , “we as nation must also adjust to new realities because Pakistan is not an Island economy, whatever happened to international economy is bound to affect Pakistan’s economy as well”