The Oil and Gas Regulatory Authority (Ogra) has recommended in a summary sent to the government that prices of petroleum products should be increased by up to 3.2% for January 2020.
It recommended the highest increase of Rs3.10 per litre or 3.2% in the price of kerosene oil – a fuel used for cooking purposes – followed by a hike of Rs2.61 per litre or 2.3% in the price of petrol, which is a transportation fuel that has an impact on the common man..
The hike in Petrol etc.,can be calibrated and differentiated by the IRP.In COVID times – the IRP (Islamic Republic of Pakistan),can raise resources,from only 5 sources
Hike in Taxes of fuel and liquor
Hike Rates of Power
Hike in Import Duty on Edible Oil
Cutting govtt staff costs
Cutting Govtt costs
The Public will not tolerate any other tax hike.dindooohindoo
Since there is a demand drawdown (id.est.,the absolute demand has reduced),so the post hike rates, might be even more than,the pre-Covid cost,to a retail user
Had the IRP locked into the Oil futures on BMD/NYMEX/CBOT – it would have been a party for IRP (id,est., not deliverable forwards – as there is no storage capacity in the world on tankers or in bond).BMD is controlled by Mahatir – the ally of IKN.
People are needlessly abusing IKN (Imran Khan Niazi).This man will FREE the Kashmiris from the yokels of the Kaffir genocide.He is the man – and providence,has got him to that seat
News anchors crib about the rates of fuel in EU and USA,and link it to the Purchasing Power Parity (PPP).Oil is sold in USD – and so, the downstream oil products have to be compared on USD terms.PPP is irrelevant. THE FACT is that the price of petrol and diesel in IRP,is the lowest in the SAARC,and is also lower, than many nations,in the EU.
However,if like in IRP,there are local refiners – then also,we have to look at the FOB rates of petrol and diesel,as there is an opportunity cost of export. IRP oil refineries are making a profit at these rates – and the tax on that profit,is going to the IRP. ONE COULD ARGUE that the Oil PSUs can sell at Marginal Cost of refining,plus some Fixed cost recovery (FCR)- so that the burden on the retail, is MINISMISED.
The ethical reason for the above,is that that IRP oil refiners,are listed on the KSE.So if an Oil PSU makes a profit on the misery of the people of IRP – and then speculators punt on it,and also earn quarterly dividends on it – which 98% of the people of IRP cannot avail of – that would, PROBABLY,be against Islamic business principles.Hence,the Oil PSU has to sell on the basis of Marginal cost,plus some FCR.
The moral reason,is that an Oil PSU in IRP,in the COVID market,SHOULD not make windfall gains,at the expense of the people of the IRP,based on inventory gains.This requires no ACUMEN or intellectual angulature.
If the Oil PSU is selling the Oil to the distributors,and there is no clause in the agency or dealership agreement,to return to the IRP,the windfall profit earned – that would be criminal.
For the news anchors of IRP – take the case of Gold.The price of RAW Gold (prime ingots and bars) all over the world,is the same – net of all taxes.The difference of 2-5%, is due to Air freight,assay cost,FX volatility(not translation) and traders margin.Similarly the price of petrol and diesel,is the SAME ALL over the world – net of taxes AND SUBSIDIES,with a margin of 5-11%,to account for differential freight and profit margin.
However,instead of hiking the rates en masse,on an ad vaolorem basis – IKN should have done the following :
Imposed a 1 time,1 year tax,on all private luxury cars,using Diesel (based on deemed fuel usage)
Imposed a 1 time,1 year tax,on all private cars using,Diesel (based on deemed fuel usage)
Imposed a 1 time,1 year tax,on all private luxury cars,using Petrol (on an adhoc basis)
Imposed a 1 time,1 year tax,on all private cars,using Petrol (on an adhoc basis)
Government vehicles can be exempted,as it is just a transfer pricing mechanism for the state . The Result will be that,the people will stop using the cars,and the 2nd hand market for the resale,will disappear,and new car sales,are in any case,in a slump.
W.r.t. diesel pumps in farm areas – the price should stay constant,or the IRP can give free power for pumping.The Marginal cost of making diesel and stocking and transporting it to farmers,is far beyond the MARGINAL COST OF FREE POWER,to the farmer.The Marginal Cost of transporting power,is only the T and D loss,PLUS the Marginal Cost of generation.In a case of falling power demand – the high cost power plants will be shut down – and the marginal cost of hydel is ZERO,and that of the other fuels,will be Rs 2-5 per unit
W.r.t agri transport – there are 2 parts.For the cost of transportation to the farmer – the propreitor has to pay a 1 time tax,based on expected fuel usage.For the transportation from the farmer to the City etc., fuel dumps in those demarcated areas,CAN REDUCE the COST OF DIESEL only – so that the lowered logistics cost,of farm output – will offset the hike in logistics costs,of farm inputs.Farmers in IRP are exploited at the point of sale of produce – and so,it is key that the output logistics costs,are kept,as low as possible.
Make the Oil PSUs of the IRP ensure,that NO WINDFALL profits are earned,by the PRIVATE SECTOR oil distributors,in the IRP
If the Oil hike CANNOT BE rolled back – then the INCREMENTAL PROFIT earned by the OIL PSUs,can be passed to the Marginal sections,in terms of free power in some geographies and power loads, a 50% hike in interest rates in small saving schemes and a 1 time bonus to marginal sections on insurance policies
Net Result
Aam junta will get diesel and petrol,at the old rates
Farmers will be insulated,from fuel hikes
Farmer rise in input costs on logistics,can be offset by the IRP,by higher Farm gate prices or free power or cash subsidies
IRP will save on tax administration,as a 1 time tax will be collected
Money saved by Aam junta on diesel,can be spent,in part on rise in food etc
When all options are exhausted – then the retail prices can be hiked en masse.There are still, many cards in the shoe.