THE petrol price hike announced on Thursday night was inevitable.

Considering the fast-depleting government coffers and the high price of crude globally, the heavy subsidy on petroleum products was unsustainable, haemorrhaging funds as it was from the national treasury. Moreover, removal of the petroleum and electricity subsidies was a key demand of the IMF, without which the multilateral lender would not authorise the release of bailout funds.

However, POL prices, as well as electricity rates, will rise further in the near future, as the subsidy has only been partially reduced, while petroleum levy and GST still need to be applied. Therefore, the shockwaves of these increases will be felt at the fuel pump, and in every sector of the economy. Though the markets have responded positively to the hike, and the rupee also gained slightly against the dollar, consumers had already begun to feel the pain on Friday.

The POL prices were frozen by the former PTI government as a parting shot and the present administration had little choice but to raise them, though this could have been done incrementally.

Editorial: Buyer’s remorse

However, the economic planners of the country must put their heads together and come up with methods to dampen the impact, particularly on the working and middle classes. People are already on tight budgets, and higher fuel prices can well trigger an inflationary storm.

There were reports of some relief measures to soften the impact on the poor, but progressive economic thinking is still needed to tackle the monster of inflation, as hardly any sector of the economy will be shielded from price hikes. Transport, grocery bills, utilities will all rise, while some vendors have already jacked up prices.

Read: PM Shehbaz announces Rs28bn relief package to mitigate impact of fuel price hike

The state must look into exactly how much of an impact POL hikes have had on the prices of everyday items, to ensure vendors are not fleecing the public. Price-checking mechanisms — rarely enforced by the state — can be of use in this scenario.

In the longer term, increasing wages and economic and industrial growth are likely solutions to our financial stagnation, as is increasing taxes on the rich and closing legal loopholes for the elite that give them tax breaks. Those who live luxurious lives should pay their fair share, instead of the overtaxed being further taxed, to improve the nation’s financial health.

Investing in renewable energy can also help shield the public from the volatility of global oil prices, while creating better public transport facilities can reduce the number of vehicles hitting the country’s roads, and consuming more fuel.

While the state bears major responsibility to soften the blow of fuel price hikes, communities must also look at collective solutions to help weather the economic storm. For example, carpooling to work and school can help bring down costs, while working from home is also an option in many cases to keep transport budgets in check.

Published in Dawn, May 28th, 2022