SMEs Express Outrage Over Petroleum Price Hike in Pakistan

The recent hike in petroleum prices in Pakistan has left many small and medium enterprises (SMEs) in shock. Despite a noticeable decline in the international market, the government has decided to increase the prices of petrol and high-speed diesel (HSD). This decision has been met with strong disapproval from the All Pakistan Business Forum (APBF), which argues that the increase is both "unjust" and "unfair" to local businesses.

According to the APBF, the average prices of petrol and HSD in the international market have decreased by approximately $1.5 and $2.5 per barrel, respectively, since mid-October. Specifically, the price of petrol dropped from about $77.5 to $76 per barrel, while HSD fell from $86.5 to $84 per barrel. Given this context, the APBF had anticipated a reduction in local prices, making the government's decision to raise rates all the more surprising.

APBF President Syed Maaz Mahmood expressed his concerns, stating that the increase in oil prices, coupled with rising electricity and gas tariffs, poses a significant threat to the already struggling SME sector. He emphasized that the current economic climate, characterized by low industrial growth and unsatisfactory export volumes, makes this decision particularly detrimental. Mahmood warned that if the government does not reconsider its stance, it could lead to severe consequences for SMEs across the country.

The recent official announcement revealed that the price of petrol has increased by Rs1.35 per litre, while diesel has seen a rise of Rs3.85 per litre. As of now, the ex-depot price of petrol stands at Rs248.38 per litre, up from Rs247.03, and diesel is priced at Rs255.14 per litre, up from Rs251.29. Interestingly, the prices of light diesel and kerosene have been reduced by Rs2.61 and Rs1.48 per litre, respectively.

The Ministry of Finance has stated that the prices were adjusted based on fluctuations in the international market. However, the APBF argues that the government has retained part of the previous increase, which has led to inventory losses for oil companies. This situation has prompted protests from these companies, who are also feeling the pinch of the rising costs.

Currently, the government imposes a tax of about Rs76 per litre on both petrol and HSD, while the general sales tax on petroleum products remains at zero. Additionally, a petroleum development levy of Rs60 per litre is charged, which directly impacts consumers. Furthermore, customs duties and distribution margins add to the overall cost, making local products less competitive in the international market.

The recent hike in petroleum prices amidst a decline in the international market raises serious concerns for the SME sector in Pakistan. As businesses grapple with rising operational costs, it is crucial for the government to reconsider its pricing strategy. A balanced approach that considers the economic realities faced by local enterprises could foster a more conducive environment for growth and sustainability. The future of SMEs, which play a vital role in the economy, depends on such thoughtful decisions.