Falling oil prices

Oil prices, which have been sliding down over the past few weeks from their July high of $147 a barrel have continued to tumble. A weakening global economy is seen as a factor in this. The latest slump, to $110 a barrel, is reported to have been triggered by fears regarding the damage Hurricane Gustav, sweeping across parts of the US and the Caribbean, could inflict on oil installations and the energy infrastructure. Some reports suggest the OPEC oil cartel, which produces 40 per cent of world oil, may cut production if global rates fall further, to under $100 a barrel.

Today, every citizen in the country is facing the brunt of unchecked inflation. These hikes hit especially hard during Ramazan, when many household budgets are stretched to breaking point. The inflation is largely a consequence of the successive increases in the prices of PoL products seen over the past few months. Rates of petrol, diesel and kerosene – the fuel used by the poorest of the poor — have been pushed up higher and higher, bringing with them an increase in the transportation costs of nearly every commodity. Of course it is consumers who are forced to bear the biggest burden as costs are passed on to them. According to the Federal Bureau of Statistics’ consumer price index, the inflation in the rate of food items soared to a record 33.81 per cent in July. Wages of course remain static. Even WAPDA’s ability to produce power has been hit by the higher rates of oil, leading to a worsening power crisis.

We have been told the price hike is the result of global rises in oil rates; that the government as such can do nothing about it. The prime minister has lamented the hardships this international situation has brought for people and promised relief. But now that world prices have begun to come down, surely we can expect some of the benefits to be passed on to these same people. So far there has been no indication of this. Indeed some accounts state yet another petrol price rise may be made. The government’s primary duty is to safeguard the rights of its citizens. Today, people everywhere are literally unable to survive because of the inflation. We heard new stories of the impact of this reality with each passing day. We have over the past weeks and months suffered the results of the increase in global oil prices. It is now only just that the benefits of the current slide should also be passed on.

Pay up!

As loadshedding continues and consumers rail against the failure of the power providers to keep the lights on, few understand that a large part of the problem is that defaulting provincial governments and agencies are not paying their electricity bills. If the average householder does not pay their utility bills they quickly find themselves disconnected; but pulling the plug on an entire province that has not paid up is rather more difficult so the government is considering a proactive move to break the cycle of circular debt that is crippling the power sector. Rather than wait for the laggardly consumer to pay his bills the government is looking at the possibility of deducting costs at source, which is going to be something of a shock to those who are used to shuffling their debts around the table and paying as little as possible and as far after the due date as they can get away with. Currently, gas and oil companies are in trouble because their bills have not been paid, as are the independent power producers. Plainly put, power generation is not a ‘for-free’ activity anywhere in the chain of supply. No pay, no power; it’s that simple.

The sums involved are large. FATA owes Rs75 billion, KESC Rs60 billion, the provinces collectively Rs11 billion, various defence organisations Rs8 billion and the federal government owes itself Rs1.5 billion. Aggregating from all defaulters there is a circular debt of Rs400 billion across the energy sector. An ‘at source’ deduction is going to be unpopular with provincial governments used to the fiscal merry-go-round and may well create cash-flow problems for them in the short term; but the reality is that the accumulated problems of the power sector, most of them inherited, have to be addressed by the new government and there is no painless way to do this. Despite the undoubted discomfort these measures will bring to everybody (hitting the poorest hardest, as ever) they are essential if the country is to dig itself out of the hole that the previous government dug for itself – and its successor. We also note that this is practical and pragmatic — rather than populist — governance; a government that is beginning to mature beyond juvenile and unattainable political promises and grapples with and then takes, unpopular decisions. We may not thank them for it today but we may well thank them for it in our tomorrows.

Ramazan scams

We all know that the giving of charity increases during the month of Ramazan. Indeed, as the month-long period of fasting has begun, posters and banners have appeared everywhere, seeking alms for those in need. Beggars of course have also multiplied on roads in all big cities. The giving out of ‘Zakat’ is of course a part of the spirit of Ramazan. The daily generosity feeds the hungry each day as the ‘iftar’ meal is distributed from private premises. The fact that this year some house-owners have had to employ security guards to maintain order outside their gates is proof of the growing desperation of people.

But each year, there are also those who stage elaborate scams to collect money that goes into their own pockets. In Lahore, young men with clipboards have been roaming many areas seeking donations for charities that in some cases seem not to exist beyond a few badly printed pamphlets. Others claim to be collecting for religious causes of various kinds. In several cases local ‘masjids’ have denied the collected money has been handed over to them. Authorities need to move in to stop such scams and scandals. Those behind them need to be dealt with under the relevant law. The philanthropic spirit that still runs through our society is one of its more positive features. It is this quiet giving of charity, in homes, in offices and marketplaces that feeds families and keeps children in schools. An effort must be made to prevent it from being exploited, both by raising awareness about the need to donate with care and stepping up policing to check those collecting funds on the streets for causes that are not genuine.

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Regards,
P.R.