Saturday, November 1, 2014

Daily Times Editorial Nov 2, 2014

Relief at last After a federal cabinet meeting on Friday, Prime Minister (PM) Nawaz Sharif announced a major reduction in petroleum prices. The decreases of up to 11 percent are the biggest in 10 years. Petrol has been slashed by Rs 9.43 per litre, from Rs 103.62 to Rs 94.19; diesel by Rs 6.18 from Rs 107.39 to Rs 101.21 per litre; kerosene by Rs 8.16 from Rs 95.68 to Rs 87.52, and HOC by Rs 14.68 from Rs 131.13 to Rs 116.45 per litre. These reductions have been made possible by the fall in the international price of petroleum, from $ 104 in August to $ 98 end-September and now hovering around $ 85 per barrel. The trend of falling international oil prices began earlier this year, but the government only now has acted on the logic of domestic prices being pegged to the international trends. It has often been the case in the past that governments have taken advantage of rising oil prices to jack up domestic rates since this nets the government higher petrol levies (currently Rs 6-14 per litre) and GST (17 percent), but ignored the opposite trend. The reductions announced by the PM will inevitably mean that the government’s revenues will take a hit, estimated at Rs 1.5 billion for November. While the government seems prepared for this revenue loss to bolster its public image as a caring administration and not the callous or indifferent regime the sit-in authors and other critics have been painting it as over the last few months, the oil industry seems unprepared to forego its profits. Hence the margins of the oil marketing companies and dealers have been raised to compensate them. This along with the impact of the depreciation of the rupee against the dollar reduces the reduction. According to the PM, and rightly so, federal and provincial authorities must now be on their toes to ensure the benefits of the reduced petroleum prices reach the common man. Whereas the country-level transporters’ organisations have already announced a reduction in fares, the Karachi transporters are sticking to their guns. It goes without saying that hopes are up that the reduced petroleum prices will not only make commuting cheaper, it will also lower the transportation costs of goods, which should translate into a much needed fall in prices across the board. Apart from the benefit to the common man, reduced petroleum prices will inevitably also be beneficial for industry, trade and power generation. If economic activity receives a desperately needed shot in the arm as a result, the decision will have been more than vindicated. The second major issue taken up in the cabinet meeting was the audit of overbilling of electricity over the last two months. The PM rightly rejected the audit report that attempted to whitewash the overbilling to the tune of 31 percent by ascribing 22 percent to the tariff increase last year and nine percent to increased consumption, thereby not only denying any wrongdoing but failing to point out the officials responsible for the debacle that is costing the government dearly in public goodwill. Nawaz Sharif ordered a fresh audit report within a week and ordered officials to address consumers’ complaints in this regard and compensate them for excessive billing. The PM also set up a high powered committee led by the Finance Minister to look into the overbilling conundrum and assess the best relief package for electricity consumers. The water and power secretary had proposed a Rs 22 billion relief to consumers of 300-500 units of electricity per month, but the PM wanted some more midnight oil burnt on this before a decision. Whether it is overbilling or the performance audit of the federal ministers, clearly Nawaz Sharif has decided to take matters in hand to refurbish his government’s declining stock in the public’s eyes. None too soon either because those in the know and perceptive observers have been complaining for months that the government has lost focus and decision making ability. A reversal of this trend can bring nothing but good for both the government and the country.

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