The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the country’s apex trade body, on Monday urged the government to announce a substantial reduction in petroleum prices.
Irfan Iqbal Sheikh, President of FPCCI, emphasized that the decrease in international oil prices should be promptly passed on to businesses and the general public.
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Sheikh highlighted that international oil prices have been steadily declining in recent weeks due to lower-than-expected demand from the United States and China, as well as an increasing number of countries opting for Russian oil. He noted that international crude oil prices are currently hovering around $73 per barrel and may even drop to $70 in the coming days, according to industry estimates, demand markers, and trend analysis.
The FPCCI President pointed out that the drop in oil prices exceeds 5 percent, providing an opportunity for the government to reduce petrol prices by at least PKR 18 per liter. He called on the government to revise its policy on fixing petroleum prices by immediately passing on the reduction in oil prices, as it does in the case of price increases.
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Expressing concerns, Sheikh mentioned that credible media outlets have reported that the Oil and Gas Regulatory Authority (OGRA) is proposing a partial reduction in petrol prices compared to the drop in international oil prices. As the government has abandoned plans to provide targeted subsidies on petrol to vulnerable segments of society due to pressure from the International Monetary Fund (IMF), Sheikh emphasized the need for the government to pass on the entire benefit to consumers without delay.
Sheikh clarified that passing on the full benefit to the public would not affect any IMF conditions or budget-making exercises since the Petroleum Development Levy (PDL) is levied as a fixed surcharge per liter rather than a percentage of the price.
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Expressing deep concerns, Sheikh highlighted that the government has already collected PKR 800 billion in the outgoing fiscal year through the petroleum development levy, raising questions about the government’s intentions regarding petroleum products.
Sheikh stressed that taking this timely step could help alleviate inflationary pressures and provide some breathing space. The government itself projects that inflation will remain at least 21 percent in FY24, which will further worsen economic conditions and the cost of doing business.
Furthermore, Sheikh noted that the first cargo of Russian oil is expected to arrive later this month or early next month. This presents an opportunity for the government to gradually reduce petroleum prices in the country. He suggested increasing orders for Russian crude incrementally to enhance its share in the crude oil mix, making it more cost-effective.
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The business community has supported the government’s decision to import Russian crude for several reasons, including potential cost savings of up to 30 percent compared to the international market, payments being made in Chinese Yuan to stabilize the Pakistani Rupee, the possibility of obtaining even more competitive prices in the future, and utilizing the idle capacity of Pakistani oil refineries.
The FPCCI’s call for a significant reduction in petroleum prices aims to mitigate inflationary pressures, support businesses, and provide relief to the general public. The government’s response to these demands will be crucial in determining the impact on the economy and the cost of living for Pakistanis.
