PASS on the increase in international oil prices to the consumers — this is the textbook solution. Prices increased due to the war in Ukraine. A war-based, rather than a textbook, solution is called for.

Most of the world did not pass on the cost of Covid vaccinations to the people. These were once-in-a-lifetime pandemic costs. Attempts were even made to protect against lay-offs through social safety nets. The IMF gave us funds, without us asking for it, to fight the Covid-imposed recession. As it was a global problem, it did not raise concerns about our subsidies meant to check poverty and amnesties meant to whiten money.

Despite the global rise in oil rates, the inc­rease is considered a local problem because many countries are rich enough to take the hit. As there is no sympathy for a stimulus or subsidy, we must find a local solution.

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How about the entire formal-sector labour force contributing one day’s salary to the national exchequer? The salary budget for civilian federal government employees over 10 months of FY2022 (July to April) has been around Rs245 billion. This is roughly Rs25bn per month and Rs833 million per day. The monthly subsidy on petrol before the hike of Rs60 was projected to be close to Rs150bn. Thus, just one day’s salary of federal government employees should be enough to cover subsidy expenditure of over five months. Add to it the salaries of the armed forces, employees of the provincial governments and those working in autonomous bodies, and we easily have much more than the annual expenditure on petroleum subsidy. We can even exempt low salaried employees from contributing, especially if we induce private-sector employees in the upper brackets to contribute.

Giving up a day’s salary may help cover subsidy costs.

The amount accumulated thus can be used to cover the subsidy on petrol. While increasing petrol price is highly inflationary, the cut in purchasing power due to loss of a day’s salary would not cause any inflation.

If we’re short of money to cover the petrol subsidy, we can take recourse to public appeals like ‘qarz uttaro, mulk sanwaro’ (repay debts and let the country prosper), the 10 per cent austerity measure and, of course, the ‘dam fund’. The accumulated dam fund might be lying somewhere and may come in handy to cover at least a part of the petrol subsidy. Also do not forget the potential of photo ops, with real estate tycoons and businessmen giving cheques to the government to prove their patriotism and concern for a government in need.

The subsidy on petrol to motorbike owners, which is very difficult to implement, would be a subsidy for the lower middle class rather than the poorest of the poor — the latter category who live on BISP handouts do not own a motorbike and would bear the direct brunt of the price increase while using public transport and facing the inflationary spiral.

Protecting anyone, even the poorest of the poor, against inflation is very difficult. Higher petrol prices affect everything through the cost of shipping goods to markets and energy prices. The government does not have the money required to compensate even a small fraction of the poor for their loss of purchasing power.

The money contributed by the nation in rupees by way of one-day salaries would help cover the petrol subsidy but would not provide the dollars required to import fuel. To cut the import bill, proposals like a four-day week would still have to be considered.

Read: Govt's decision to raise oil prices is a wise one. Here's why

People argue that a cut in government expenditures should be drastic to make room for the subsidy. Stopping unnecessary current and development expenditures is the ultimate solution. However, given elitist habits, this is hardly possible in the short term. But coping with pe­­t­rol prices demands immediate attention.

Still, people for­ced to give one day’s salary will ask why they should pay for the elitist lifestyle of politicians and bureaucrats reflec­ted in the use of expensive four-wheelers. It’s a valid concern. But the inflationary spiral from petrol prices will also raise cargo costs and electricity prices. This would affect everyone. It is to save ourselves from this spiral that the public should contribute a day’s salary to the national exchequer.

To convince the people, the government would have to cut at least some of the wasteful expenditure in order to create positive optics. For instance, all government vehicles could be off the roads on weekends; the president, prime minister and ministers could avoid gracing inaugurations and conferences with their presence. To save money, there should be no advertisements on television and in print media praising the government or criticising the opposition. The number of people and cars in prime ministerial entourages at home and abroad should be cut. The prime minister’s camp offices in Lahore should be reduced. Finally, the expenditure on the mantra of ‘petrol bombs’ and ‘landmines’ must be cut.

Writer’s note: This article earlier mentioned a projected subsidy figure of Rs150 million per month. In fact, this should have been Rs150 billion (not million). The error is regretted. The projected figure is based on the expected increase in petrol prices and different media reports. The argument itself still stands — that one day’s salary of the employees of the entire labour force in the formal sector would help cover a significant part of the petrol subsidy.

The writer is a researcher.
idreeskhawaja@pide.org.pk
Twitter: @Khawajaidrees11

Published in Dawn, June 4th, 2022