Government Initiative

Imran Khan directs authorities to draft petrol subsidy plan

According to the government of Pakistan report, the price stability is prime concern of every government as high and variable inflation not only erodes purchasing power of consumers but also discourages investment. A controlled inflationary environment contributes to financial stability and economic growth. Inflation is caused by both demand and supply side of market forces. However, demand-side inflation can be controlled through prudent government expenditure strategy and restricting government to borrow from the central bank. On supply-side not only cost of input matters but restriction on the free mobility of transportation can interrupt smooth supply chain of goods and services. A real time example has been seen during lock down to avoid adverse impact of Covid-19 pandemic. The pandemic resulted in large shocks to both demand and supply hence inflation was observed globally. Historically, it was observed that inflation had risen sharply during and aftermath of major wars and same was predicted in this pandemic. Sources also recorded that Pakistan has been ranked as a country with the fourth highest inflation rate globally. The report placed Pakistan at fourth place out of a list of 43 countries. Statistics showed that the rate of inflation in Pakistan clocked in at 9 percent in September. As compared to that, the inflation rate in India clocked in at 4.3 percent, taking it to the 16th position on the list of most expensive countries. The month of September saw a new round of increased prices of consumer items as inflation edged up to 9 percent from 8.4 percent in August, data released by the Pakistan Bureau of Statistics (PBS) showed. On a month-on-month basis, inflation increased by 2.1 percent owing to significant changes in three indices — food, housing, and construction. The government of Pakistan has set the average inflation target for the ongoing fiscal year at 8.5 percent, indicating that the year-on-year inflation may remain in double digits in the fiscal year 2021-22. The PBS had reported that the overall inflation rate in both the urban and rural areas recorded an increase. The inflation rate in urban areas edged up by 9.1 percent in September and rural areas surged to 8.8 percent over the same month of the last year. In September last year, inflation in urban areas was recorded at 7.7 percent and in rural areas at 8.4 percent. The inflation rate for the housing, water, electricity, gas, and fuel group — having one-fourth weight in the basket — rose to 9.74 percent last month. Meanwhile, electricity charges surged by 11.4percent during the period under review.11 Prime Minister Imran Khan presently directed the authorities to draft a petrol subsidy plan for low-income individuals. Sources told that during a meeting of the ruling party’s members to discuss the rising prices of petroleum, it was revealed that the plan to offer low-cost petrol to motorcycles, rickshaws and public transport owners will be presented shortly. Last week, the government of Pakistan had proclaimed a massive price hike in petroleum products, increasing the per litre cost of petrol by Rs10.49 and high-speed diesel by Rs12.44. It was also planned that committees at the district level must be formed to reduce inflation. Moreover, it is said that it was also planned that targeted subsidies will also be offered to low-income people by Utility Stores. Furthermore, Governor Sindh Imran Ismail said relevant authorities have been directed to make a plan to offer subsidised petrol to low-income groups. Imran Khan, during the meeting, said the targeted subsidy programme will be introduced with joint financial support through the federal and provincial governments. He revealed that Punjab and Khyber Pakhtunkhwa have already expressed interest; meanwhile, discussions are underway with Sindh and Balochistan. A large targeted subsidy programme for the poor will be launched soon.

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