Friday, July 10, 2009

Petroleum Prices Controversy.

Unnecessary hype has been created by some people over petrol prices and it's taxation.I have dealt with the issue of petroleum prices in my forthcoming book"Pakistan's Energy Development, The Road Ahead".I would like to make the following points:
  1. Peroleum taxation is not new and unique for Pakistan.Throughout Europe, heavy taxation is applied.In Europe petroleum prices and taxation are more than two times that of Pakistan.Elsewhere in the world also petroleum taxation is high.
  2. Pakistan's petroleum prices and taxation are lower than in India, Turkey and other countries with comparable stage of development and bieng oil importers.
  3. GOP provides a subsidy of Rs.100 billion to electricity sector, which in part is a subsidy to the oil consumed for electrical power. Renaming of the tax from PDL to Energy tax is quite appropriate in view of this subsidy.
  4. Only rich motorists except motorcycle owners, are still on petrol.All low income and middle income groups have converted their vehicles to CNG.
  5. Energy is generally cheap in Pakistan as compared to other countries.Gas prices are less than half on the average as well as electricity. Successive governments have maintained low prices due to low income of people in Pakistan.But as the portion of local production declines, imported items have to be paid for at their market price.
  6. There is a lot of waste of energy including that of petrol, electricity and gas.Cars are not tuned, domestic appliances and motors are 50% less efficient than comparable devices. Industries leak and waste natural gas. Inefficient airconditioners add to peak power demand and other technical problems.
  7. GOP , utilities and petrol companies can make the energy affordable by encouraging the consumer in using energy efficient appliances.Also GOP should take the steps in educating producers to produce energy efficient appliances.
  8. Judiciary would be well advised not to act without the benefit of adequate infomation. Instead of contacting selected individuals who may have an "agenda", a public enquiry should have been conducted inviting inputs from a wide body of people who have the requisite know-how and knowledge. Reports have been compiled on selective and selected inputs.There are so many other areas needing the time and resources of judiciary's attention where a proactive role could be played with greater dividend.Even more importantly a future usurper of power would make these judicial interferences as a basis for winding up the whole system,even cutting the newfound freedom and space for judiciary. We want sustainabe freedom and justice not occasional and activist.
  9. Prices are obviously higher than oil producing countries of Middle East where through massive subsidies, oil is sold virtuallly free or the price are lower than Pakistan and in the destitute and unfortunate African countries, where affordability issues are worst than in Pakistan and many Pakistanis would not like to be in their shoes.Except for the US and the oil producers , higher oil/energy prices correlate with the level of development.
  10. Petroleum taxation has been a classical tax, initially applied a s a tax on consumption and later more so as a road user charge and more recently as Carbon tax. In Germany 20% of elctricity retail tarriff goes towards energy policy taxes and about 12% in the USA goes towards PURPA, public purpose projects such as induction of renewable energy.
  11. It is unfortunate that naming conventions of tax has been exploited to cause undue difficulties to GOP, which is facing liquidity crunch due to a variety of well known reasons. All taxes go to consolidated fund.Taxes need not be used exactly in accordance with the tax name.These are legacy names like excise duty and salt act etc,.Elected representaives of the people have a right to make determinations of spending priorities.

In coming days I will be posting actual data.

1 comment:

  1. Dear Mr. Akhtar,

    I don't agree with all you have said. Government is taxing more than justified. The prices here in Pak are much higher than countries like US and Canada(but are same as UK).

    Converting to CNG was a mistake as it is clearly visible now.

    It would have been much better to introduce: public transport; increase the price of desiel; link the price of petrol to international market; and invite Pakistani minds aborad to work on alternative energies and nanotechs. Our best minds are serving other nations. Alas!