Federal Finance Minister Miftah Ismail Thursday said that the government would try its best to maintain petrol prices and assured that even if the rates were increased, no new tax or levy would be imposed.
He was addressing a press conference in Karachi.
“The government had previously never sold petrol at a loss because the economy could not afford it,” he said, adding that if fuel prices are not hiked in May, the treasury will lose around Rs102 billion. He blamed the previous Imran Khan-led PTI government for implementing policies that contradicted what was agreed upon them during meetings with the IMF in Washington.
The government was currently accruing a loss of Rs30 per litre on petrol, he said, claiming the previous government had agreed to not only avoid a loss of Rs30 per litre but also impose a tax of Rs30 and 17pc sales tax. The price of petrol should have been Rs245 per litre according to the agreement the former government did with the IMF, he said. However, the Pakistan Muslim League-Nawaz (PML-N)-led government was still selling petrol at Rs145 per litre and would try its best to maintain it, he added. “The difference in their (PTI government’s) words and actions is Rs100,” he said.
The incumbent government was losing Rs70 per litre on diesel, the finance minister shared, claiming that the burden of these subsidies had been placed on the public.
“The entire monthly cost of running the civilian government is Rs45bn, including the courts, the education and police systems. We are accruing losses of Rs102bn only on fuel, which is equal to the cost of running two and a quarter governments… this cannot happen.”
He elaborated that the government had to borrow Rs102bn from the market but liquidity had been tightened. The government could no longer borrow money from the State Bank of Pakistan (SBP) because of new laws related to its autonomy, he added.
“If I did that, the federal government would have to pay interest but it would come back to the State Bank. When the SBP lends to us, it means we are printing money, which increases inflation.”
However, when the government borrowed money from private banks, a few other factors came into play, including a higher interest rate, he said. The interest rate was so high, that the market had been shaken, he claimed, adding that when the government borrowed from private banks, they did not have enough money left to lend to the private sector, which resulted in reduced investment and industrialisation.
In addition, banks did not have enough money left to open LCs (letters of credit), leading to increased inflation, he said. “When big companies do not have money and banks delay opening LCs, then there is a shortage of fuel because of which load shedding increases.”
He claimed that 7,500MW power plants remained shut during the PTI government’s tenure because they did not have fuel while 2,000MW power plants were closed because of a lack of maintenance. The Pakistan State Oil (PSO)’s receivables were over Rs500 billion and it would not be able to function if money was not provided, he said.
“When the PML-N government’s tenure ended in 2018, the country was progressing and there was no circular debt in the gas sector. There was no load shedding in the gas sector. Now, load shedding in the gas sector [is because of shortage of] Rs1,500 billion.
Can the former prime minister get me that money? We left [the circular debt at] Rs1,062 billion in 2018 and now it’s hovering around Rs2,600 billion.