KARACHI: Following the government’s decision to increase prices of petroleum products and electricity tariff on Thursday, stakeholders believe that while nearly everyone would be impacted, the urban lower and middle classes would be the worst-hit.

Speaking to Dawn, goods carrier operators said that they had increased fares by 30 per cent in the previous diesel price hike and were contemplating a further rise.

Karachi Goods Carrier Association (KGCA) President Rana Mohammad Aslam told Dawn, “Our members have started holding discussions after another price shock in diesel rates and we will be bound to increase fares by another 25-30pc very soon.”

Rana said the fare of two-way trailer movement between Karachi and Faisalabad/Lahore is now Rs170,000 as compared to Rs100,000 a few months back, but this fare would reach close to Rs200,000 in coming days after a fresh hike in diesel rates.

“Our transportation charges are not fixed with any private or multinational companies. We operate in an open market environment,” he said, adding that some 15,000 goods carriers arrive and depart from Karachi to different parts of the country on a daily basis.

He said goods operators have been trying hard to survive as many of them have reduced their number of vehicles besides getting defaulters in view of the massive hike in other expenditures like the meteoric jump in engine oil, spare parts, tyres, rims, etc.

Meanwhile, Chairman All Pakistan Oil Tanker Owners Association (APOTOA), Iqbal Jangiri, said, “We do not get any serious hit by any fluctuations in petroleum prices as our freight rates are fixed as per agreement with the stakeholders and the government.”

He said transportation charges are adjusted as per the ups and downs in petroleum prices depending on the kilometres of hauling the oil to various destinations.

“Actually, consumers swallow the bitter pill of rising petroleum prices rather than oil tanker owners,” he said.

Impact on urban classes

Speaking to Dawn, Collective for Social Science Research Director Dr Asad Sayeed said the back-to-back increases in petroleum products will disproportionately affect the urban lower-middle class. He said the cost of transportation will go up substantially while the prices of everyday items ranging from milk and bread to vegetables and fruits will also rise.

The rural population will have to spend more on diese`l-run tube-wells, but their cost of living won’t go up as much as that of their urban counterparts, he added.

“They had to raise the prices. They had no choice,” Dr Sayeed said in response to a question about the possibility of continuing the fuel subsidies. He said the government should’ve started aligning local fuel prices with the international markets the day it came to power in April. “That could’ve prevented the run on the rupee by acting in time. The IMF would’ve resumed its loan programme already and we would’ve received inflows from other lenders,” he added.

Talking to Dawn.com, macroeconomist Sajid Amin Javed said the “steep” price hike would cause a high inflationary impact and put added pressure on the people. However, he said that there was no other option since if prices were not increased then Pakistan would have lost its IMF programme and been left with foreign exchange reserves for only six more weeks.

Javed said the last government’s “myopic” behaviour was to blame for the current crisis since it had given a subsidy soon before its departure. However, he said the current government had also committed a mistake by not taking the nation into confidence earlier and taking its time in increasing the prices.

He said the government should completely eliminate its “unproductive” petrol subsidy since it could not afford to maintain it.

Javed said the government also needed to expand the scope and duration of its relief package for those deserving of aid. He added that the IMF did not have an issue with social protection programmes and so part of the money saved through the reversal of the subsidy could be diverted to such initiatives.

Among other measures, he said the government needed to crack down on hoarding and profiteering, engage district price control committees and restore higher slabs for taxable income. All these steps in conjunction could help to control inflationary pressure, Javed added.

Meanwhile, the business community has also rejected the increase in electricity base tariff, calling it “unlawful”.

Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Idrees said a power tariff hike would prove detrimental for industries due to the high cost of doing business and would also push up prices of all household goods.

The decision violated the Nepra’s rules and regulations because any increase in tariff had to be determined and implemented only after holding public hearings, but unfortunately, this has not been done, and it was solely decided to raise the base tariff, which was unacceptable, he said.

He urged Prime Minister Shehbaz Sharif to take notice of Nepra’s unlawful actions and issue strict directives to the power authority to hold consultations with the stakeholders and implement an increase in tariff only after holding public hearings.

Syed Talal Ahsan also contributed to this report

Published in Dawn, June 3rd, 2022