With fuel prices rising almost daily, the government increasingly appears unwilling to do anything to shield the public from the global oil shock.
Following the latest revision under the controversial daily price fixation mechanism, effective Sept. 12-14, petrol retails for Rs. 375.82/liter and high-speed diesel for Rs. 403.32/liter. Prior to the outbreak of the Iran-U.S. war in late February, petrol stood at Rs. 258.17/liter and diesel Rs. 275.70/liter. In effect, petrol has risen by almost 44%, while diesel is up by nearly 44.4% from pre-war levels.
According to the government’s own figures, it is presently charging around Rs. 114/liter in taxes and duties on petrol and Rs. 100/liter on diesel. Taxation alone, therefore, accounts for almost 31% of the petrol price and 25% of the diesel price. Put plainly, roughly a quarter to a third of what consumers pay at the pump goes to the state in taxes and duties. The question, then, is whether the government intends to mitigate the crisis or continue to simply pass its full cost on to consumers.
The global crisis is real. The Iran-U.S. war and its disruptions to global shipping lanes boosted prices. The latest escalation between Saudi Arabia and Iran-backed Houthis has further threatened energy infrastructure and shipping routes, with Brent crude surging past $100/barrel. But acknowledging the global crisis does not absolve the government of its basic responsibility.
Surging oil prices globally inevitably limit how much relief the state can provide, but maintaining this significant tax burden is a clear policy choice. At some point, taxation ceases to be merely revenue collection and becomes punishment. For millions already struggling with the cost of living, that point may already have arrived.
For a country like Pakistan, with limited public transport options, higher petrol prices raise the cost of daily commuting. Diesel proves even more consequential because it powers much of the country’s freight and heavy transport network, with rising rates translating into higher food prices and higher costs for virtually every other commodity.
Pakistan has hardly recovered from the purchasing-power shock of the 37.97% inflation recorded three years ago. Household budgets remain stretched, savings have been depleted and wages have struggled to keep pace. Another broad inflationary shock could quickly erase the fragile gains of recent years.
The public knows how much it is paying into the state’s coffers. It is also painfully aware that even as it is forced to cut back on basic needs, ranging from school fees to utility bills and even food, those in government continue to enjoy extravagant perks. Many government officials and institutions receive fuel allowances that insulate them from the pain ordinary motorists face at the pump.
The opposition, meanwhile, appears more interested in converting public anger into political capital than in forcing the government to provide relief. Jamaat-e-Islami has at least consistently protested fuel taxes for nearly a month. Whatever one’s view of the party, it has highlighted an issue other opposition parties have largely failed to make their own.
The government may mistake quiet streets for public acceptance. It should not. People can absorb only so much before anger turns into action. If Islamabad continues to pass every external shock directly onto consumers while insulating itself from the consequences, it should not be surprised when the pressure finally boils over.