Benjamin Disraeli had put it aptly: “lies, damned lies, and statistics”. Media is using ‘statistics’ to politicise the issue of petroleum prices. Politicians on both sides of isles have previously also done the same. It makes sense for politicians to spin the facts as their job is to use facts in their favour to build narratives — both PML-N and PTI leaders have acted in this manner. However, the role of media should be pro-fact and pro-truth, not pro-parties. Media’s role ought to be that of a watchdog.
The narrative being spun in the mainstream media over the last week or so is that Imran Khan’s government had agreed with the IMF to take petrol prices to Rs250 (or Rs270) per liter; and incumbents are only fulfilling what was promised by the PTI government. That is absolutely none-sensical. Those who hold this view have perhaps never read any IMF document. Many are so called ‘seasonal’ experts at a time when economics of petroleum prices is the hot topic of the day.
The first realisation media needs to have is that the increase or decrease in petroleum prices is subject to international prices in dollars which is then converted to Pak Rupee based on prevailing parity at the time. Higher the international prices; higher shall be the domestic prices. Higher the Pak Rupee depreciation, higher shall be the petroleum prices at home. It is not one or the other political party to blame.
What PTI government had agreed to the IMF was to increase the Petroleum Levy (PL) every month by Rs4 per liter and take it to Rs 30. When the IK government froze the prices from 1st March 2022, at full GST and Rs30/litre PL, the price of petrol should have been around Rs210/liter. The price of petrol at full taxes today would be Rs290/liter, which is partly due to increase in the international prices and PKR depreciation since then. Let’s have the facts straight.
The other issue with the media is that a few months back when the PTI government was increasing petroleum prices by even a few rupees it would term the actions as ‘petrol bomb”. Today, the increase of Rs60/liter in a few days is being described as the need of the hour for fiscal consolidation and the blame is passed on to policies agreed by the PTI. One may wonder what has led to this change of heart for many media persons.
Some say that back when PTI was increasing prices, it was applying tax while the government today is shaving off the subsidy. Let’s see in coming weeks how would they advance the same argument when new government begins to apply PL and GST on petroleum prices. The other argument is that PTI signed a so-called bad deal with the IMF. Now what is stopping the new government to renegotiate with the IMF. If they cannot, why the blame is solely on the past government?
The point is that media is misrepresenting the facts either deliberately or in naivety. The need is to emphasize the pricing elements which are in control (or could be in control) of the government. The decision of freezing the prices took place in the backdrop of vote of no-confidence against the then prime minister, Imran Khan. It was wrong. An even higher amount of subsidy is being doled out by the present government. Why did it not reverse the decision on day one after coming to power? What is the cost of the indecision?
The currency could have been around Rs180/USD today had petrol prices not been frozen and kept unchanged for almost three months. Both PTI and PML-N governments share the blame for this blunder.
In addition, PTI Senator Shaukat Tarin openly said that he had spoken to a powerful person to not allow regime change as this could send the economy into a tailspin. He is spot on. The current crisis — in terms of economic numbers, is not out of proportion to what the country had faced in 1998 or 2008. However, the unique nature of political uncertainty has created the risk of default and dampened the sentiments. This fact needs to be highlighted and appreciated.
Having said that, both the government and the media must highlight the elements which lead to increase in petroleum prices, and can allow reduction if handled well. One is to bring the economic confidence back by signing with the IMF on the 7th review. That would help in appreciation of currency to 180-190 levels and would reduce the need for increase in petroleum prices and improve overall sentiment.
The other thing required is to lower the gross margins of refineries. That is a technical issue and needs immediate attention. Local refineries produce around 60 percent of high-speed diesel (HSD) and around 30 percent for petrol (MS). The spread earned on current ex-refinery price over crude oil is abnormally higher than long-term average. If we cap HSD and MS margins for refineries to say around PKR 20/liter for HSD and PKR 15/liter for MS, it can reduce prices by Rs30/liter for HSD and PKR 10/liter for MS.
These are exceptional times. All stakeholders must chip in. Margins of oil marketing companies (OMCs) and dealers are already regulated by the government. The government should also regulate the refining margins till the times these margins are exceptionally high. Even developed countries are levying windfall taxes on energy companies. However, such taxes might not work in Pakistan, as energy companies cash flows are constrained due to circular debt. Then two refineries (PARCO and PRL) are government-owned. The need is to sit and negotiate with Attock group; and for Byco to fall in line.
Media should talk about the solutions. It should report facts and remain pro-truth at all times. Otherwise, a clear tilt in mainstream media towards the sitting government at a time when ads on few TV channels and newspapers are peaking raises question on the independence of media.
Copyright Business Recorder, 2022
Ali Khizar is the Head of Research at Business Recorder. His Twitter handle is @AliKhizar
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