The petroleum products price revision is increasingly becoming a matter of joke. Ogra announces an increase, media goes crazy, the political parties step in, threaten to quit the government etc - and the prices are eventually reversed or halved.
By the time of writing this article, the price increase has not been reversed yet, but if recent history is any guide, prices will soon be reverted, perhaps by the time you read this.
The 9 percent upward revision in gasoline prices reflects the surge in global crude oil prices following the Arab unrest and Japan disaster. But the opposition within and outside the parliament has lamented the governments move citing it as criminal, unjust and against the spirit of democracy.
One may argue that this is how the opposition has traditionally done its politics in Pakistan, but the government cannot be spared for being part of the mess anymore. It seems that the government too is now playing politics by showing how much it cared for the people - by first announcing a hike and then taking it back in a few days, in hopes of being praised.
And if that is the political weakness and the lack of convincing ability of its finance team, then one could expect worse as the oil prices are in no hurry to cool off. The Petroleum Levy (PL) on gasoline is down to Rs3.1/ltr from the original level of Rs10/ltr - which leaves absolutely no room for oil prices to be brought back to the previous months level, even if the government forgoes the PL entirely.
If the government eventually succumbs to the political pressure and is forced to maintain prices at the previous months level - it would be dishing out subsidy in real terms, over and above the loss in revenue from the PL account. Since the PL is already on the lower side, even halving the price increase would result in a subsidy over and above the revenue loss.
Such is the desperation in the government camp that it has started a media campaign about the losses it has suffered by not raising the oil prices for the sake of the people, urging the public to consume less oil.
But why consume less oil? Is there a hint that the government is actually planning to subsidise petroleum products? Because asking to consume less oil, defies logic in the non-subsidy regime, as it would only result in even lower revenue collection on account of PL and GST.
It is unfortunate that economic rationale continues to take a back seat as political wisdom wins over every other time.