Oil & gas: a cash cow?

THE government is reported to have collected an all-time high revenue of Rs157bn on oil and gas in the last fiscal year. This is a hefty amount that constitutes a massive chunk of the total tax collection of Rs890bn. Coming as it does from a variety of sources comprising petroleum development levy (PDL), sales tax, gas development surcharge, excise duty and royalty, the size of the oil revenues is a major factor contributing to the soaring oil prices. These in turn increase the cost of transportation, electricity generation, industrial production and house-household expenditure. In fact, the oil and gas taxation and pricing policy is eroding the purchasing power of consumers and is an important factor in pushing up inflation levels.

The mode of tax collection also tends to blur the transparency that is expected to mark revenue collection to inspire confidence in the public. The Annual State Bank Report 2005-06 observed that the improvement in the pace of revenue collection may not be sustained in fiscal 2007 “as the government has not budgeted any revenue” from PDL. Earlier, it had been announced that the levy would be fully utilised for subsidy on kerosene oil and diesel. However, the amount of PDL collection in the last fiscal was far in excess of the official subsidy. The government now also collects much higher corporate taxes on the enormous profits the oil producers and market companies have been making since the Iraq war triggered unprecedented oil price hikes. On top of it, the three state-run units, namely the Oil and Gas Development Corporation, Pakistan Petroleum and Pakistan State Oil, made a net profit of well over Rs65bn in 2006-07. To further encourage indigenous production, the new policy announced in July has increased prices by six to eight per cent on new gas discoveries. The cap of $36 a barrel oil equivalent on the locally produced gas has been lifted and linked to international prices despite the lower cost of domestic production. With a revenue-oriented approach, the government looks at the oil and gas sector as a “cash cow”, ignoring the paramount principle that it is energy that fuels economic development and needs to be strategically taxed and priced as a utility of mass consumption.

It is the wrong energy policies of the government that have resulted in critical shortages of power. Faulty pricing has contributed to high cost of industrial production making exports less competitive. Growth in manufacturing and exports has slowed down. On the expenditure side, about 75-80 per cent of the annual GDP growth is contributed by the consumers whose purchasing power is being eroded by high inflation. This has limited their capacity to spend on a wide range of industrial products which in turn could have helped diversify production and the export base. It is time to review the oil and gas taxation and pricing policy to check any possible economic downturn, particularly after the Asian Development Bank has lowered its estimate of Pakistan’s GDP growth rate to 6.5 per cent as against the government’s target of 7.2 per cent in the current year.

Saving our dams

REPORTS that Mangla and Tarbela dams are silting up should surprise no one. Soil erosion is a natural phenomenon which, at its normal pace, does not spell ruin or disaster. Far from it, in fact, erosion actually benefits downstream agrarian communities by replenishing the top soil in times of floods. The problem arises when the hand of man speeds up what ought to be a slow, gradual process. Just like there is nothing inherently alarming about changing coastlines or climate change, both cyclical processes that have repeated themselves endlessly since the planet came into being, erosion becomes a concern only when the process is accelerated by human activity. What should be a trickle then becomes a torrent, the grain of sand a crashing boulder. The sediment that is depleting the capacity of our biggest dams is certainly cause for concern, for the water they hold in reserve and the power they generate have a huge impact on productivity, both agricultural and industrial. In the case of Mangla, efforts are underway to increase the reservoir’s capacity by raising the height of the structure. Inaugurated by the president on Sept 30, 2002, the ‘Mangla-raising’ project is now in its final stages, though it remains to be seen if the December 2007 deadline set by the prime minister ten months ago will be met by the contractors. When completed, the project will increase Mangla’s capacity by 2.9 million acre feet (MAF) and hopefully provide an additional 644 gigawatt hours of electricity every year.

The fact remains though that acts of desperation such as the raising of Mangla Dam — at a cost, roughly, of Rs62bn — are simply not sustainable. It is not within the realm of engineering or fiscal practicality to keep on increasing the height of old dams. Desilting, meanwhile, is apparently too expensive and intrusive a procedure. The focus then should be on root causes which, in this case, is deforestation. The timber mafia has raped the north of the country in recent decades, with official blessing. Like our morals, the soil is loose and subject to devastation. Landslides and flash floods are also natural phenomena, but their frequency is increasing at an alarming rate. We have upset the natural order of things and it is up to us to right the wrongs inflicted on the rest of creation. Unsustainable logging must be halted and reforestation made a priority. Even a fraction of the money the Punjab government spends on glorifying its CM in television advertisements will do.

Risks journalists face

IT IS a matter of great concern that journalists continue to face tremendous risks while doing their job thus belying the government’s claim that the media is free. On Saturday, Babur Hussain, a Dawn News reporter, was picked up by plainclothes men outside his home in Rawalpindi and taken to an unknown location where he was kept — and interrogated — until his release on Tuesday. Mr Hussain was picked up a day after his report on the suicide attack on SSG commandos in Tarbela was telecast. Just last week the teenage son of journalist Shakeel Turabi was beaten outside his school in Islamabad by an unidentified man as a way to “punish” his father for writing “false reports”. (Mr Turabi himself was earlier beaten in May for contradicting government claims.) Then there are reports of attacks on journalists covering Nawaz Sharif’s arrival in Islamabad. These incidents have occurred just in the last ten days. Yet the information minister will have us believe that the Pakistani media is the model of a free media in South Asia. Facts and figures show otherwise: the IFJ reported 100 journalists were attacked or threatened in Pakistan in 2006 while four were killed.

Such acts of intimidation and threats against journalists are simply unacceptable. So is the government’s inability to check its security apparatus for its illegal detention of journalists. The murder of reporter Hayatullah Khan in 2006 remains unsolved as do scores of cases of illegal detentions or attacks on media persons. They must all be seriously investigated and the guilty must be punished in accordance with the law. The government has a responsibility to ensure that journalists can do their job in an environment free of risk and intimidation. Threats to silence the media will only cause more harm to the government.

Ramazan price hike

PRESIDENT Musharraf is personally interested in stabilising prices of essential commodities which have been leaping up beyond control, and is making moves in that direction.

Normally he leaves economic management to Prime Minister Shaukat Aziz but this is election year and a controversial presidential election lies ahead. The prices have been vaulting out of control with atta selling for an unimaginable Rs20 to 22 per kilo. LPG prices have risen by three rupees per kilo and vegetable oil prices have been soaring. Vegetable and fruit prices are equally high and beyond the reach of the common man who wants to eat less but better food in Ramazan.

Export of onion, surplus in Sindh, has been banned but the prices have risen from Rs18 per kilo to Rs25.

The nan sold in the bazaar now sells for four rupees instead of three and may go up further. After the bumper wheat crop of 22.5 million tones which has now been reduced to 22.2 million tones, efforts were made to export wheat to India for the first time after a long period. Suddenly scarcities appeared all over the country and the hoarders and profiteers went to work and a ban was put on the export. Still the prices continued rising higher and higher from the original Rs16-17 per kilo and the government has now decided to import one million tones of wheat to create a buffer stock to meet future needs.

The same has happened to onion but we are not importing onion yet. Anyway, its arrival takes time unless it is airfreighted which makes it a lot more costly.

There has been opposition to the move to import sugar from India. Sugar millowners want to keep the sugar prices high and not be discouraged by the import.

They say there should be enough sugar at the end of this season as production will rise by 25 per cent over the last output. But in spite of the possible surplus when the price manipulators and profiteers go to work on the sugar the commodity will vanish. And higher prices can become a reality again.

Now the Trading Corporation of Pakistan is selling some of its old stock of Indian sugar to bring down prices. The sugar mill owners are objecting to that. Old sugar cannot be held in stock for too long. As it looks we may have to import sugar from India again to make up for the malpractices at home. When we have too many traders engaged in converting surplus in shortages, irrational imports become essential.

Wheat export is banned to all countries except for wheat flour to Afghanistan as it is dependent on Pakistani flour.What will the president and the prime minister do to bring down the prices? They will hold a few high level conferences with the prime minister and other federal ministers. He will give them the usual directives with a sense of urgency to bring down the prices which, in fact, should be the responsibility of the provincial governments. The provincial chief ministers on return to the provinces will pass on their directives to the ministers and secretaries to the government. The result of this familiar exercise as seen in the past may be too little.

The prime minister says that during Ramazan, in addition to the Friday or Sunday bazaars, we will have sasta bazaars as well. That may help some persons with some items not more.

The prime minister says the utility stores whose number has now risen to 3,600 from 1,000 will sell more goods at subsidised rates but these can solve only a small fraction of the large problem.

The basic problem is that of tackling the surpluses turned into shortages and fair distribution of goods at fair prices in sufficient quantities. Utility stores can be handy for dry items but not wet items like vegetables and fruits more in demand in Ramazan.

The provincial ministers have to study the price situations and the supply levels but they cannot go around for reasons of violence against them but surely the district government and the union councils should be able to do far more than they are doing now.

What is the use of the local government if it cannot rise to the occasion at such moments and what is the use of the elaborately prepared price list with so great deal of pain and published before Ramazan if they cannot be enforced. The inefficacy of the local administration in this key sector is excessive.

The traders who push the prices in Ramazan and carry them to their peaks before Eid do not bring them down after Eid substantially and that adds to the hardships of the people. The problem in Pakistan is that the consumer have fixed eating habits and they do not want to change. In fact, the consumers have no alternative to wheat , rice is far more costly and bajra is an entirely different item. Gur can be more costly than sugar and vegetable oil are uniformly costly.

The weakness of the consumer in Pakistan is that there is no resistance to high prices. People continue to buy at higher prices as many people have deep pockets and few alternatives. They do not want to resist consuming anything the price of which has gone up steeply and they are also handicapped by the lack of alternatives.

Pakistan is a high profit country. The highest profits are made here as compared to any other south Asian country. The industrialist, importer, wholesaler, the average trader, the retailers and the push cart walas believe in high rate of profit and get it. The assurance they can sell their wares at any price makes them fix high prices and get them.

At a meeting of the standing committee of the National Assembly, some members complained that the sugar crisis in Pakistan is caused by some ministers who own the sugar mills and the others who own large sugarcane fields. As they demanded high prices for the sugarcane, the sugar is coming to cost a great deal.

At another meeting, it was reported that some influential persons were holding wheat in petrol stations upcountry and other unlikely places. No action has been taken against any of them.Usually the hoarders and profiteers have the protection of influential persons and so they have nothing to fear in such a free for all political environment.

Eeveryone feels free to make large profits quick in the name of trade or industry and the common man has no protection. In fact, the tragedy is the failure of the consumers to organize and assert themselves to protect their vital interests.

Pak-Afghan trade ties

Wahdat

PAKISTAN has been unable to play a proactive role in safeguarding its interests in Afghanistan since the inauguration of the government led by President Hamid Karzai, with the result that India is getting closer to the landlocked country and stepping up its activities there, despite the absence of a common border between them.

During Karzai’s recent visit to India, the signing of an accord on expanding trade links and Delhi’s assurance of continued assistance to Kabul were essentially aimed at undermining the position of Pakistan and strengthening India’s foothold in the war-torn country.

It is about time Islamabad stopped watching the growing Kabul-Delhi partnership as a silent spectator and jerked into action to promote its core interests in the neighbouring country.

Pakistan should adopt a realistic approach towards the rebuilding of Afghanistan by reviewing the bilateral trade regime so as to tap irresistible opportunities emerging next door. Determined efforts by both sides to exploit the situation for boosting free trade will give Afghanistan’s rebuilding a much-needed shot in the arm on the one hand and guarantee the economic prosperity of both on the other. In the prevailing circumstances, Pakistan has bright prospects of capturing the mammoth export market in Afghanistan, where basic civic amenities are non-existent due to three decades of strife.

For Afghanistan’s reconstruction drive to gain momentum, Pakistan is ideally placed to export a wide range of items like cement, steel, paints, marbles, tiles, medicines, electronics and other commodities at competitive prices. With the export duty on these items already abolished, Islamabad should have a shot at shipping more goods to Kabul and thus pave the ground for the liberal import of Afghan products demanded by Pakistanis. One way of achieving this goal is to organise trade fairs in major cities on both sides of the border. — (Sept 18)

Defining terrorism

Hewad

GENERALLY speaking, Muslims have failed to grasp the meaning of a whole new phenomenon called terrorism that gained currency in the wake of the devastating 9/11 attacks on the United States. The Islamic world, faced with the twin challenges of unemployment and a dismally low literacy rate, did hear of the catchphrase but could not make out who the real terrorists are. Islam being a religion of peace and tolerance enjoins on its followers to respect the sanctity of human life and refrain from wanton violence. But wealthy nations of the world still look at us with suspicion for reasons beyond our comprehension. A dispassionate analysis of the international security environment will lay bare the reality that impoverished people living in this part of the globe have no role in fuelling terrorism.

The wretched dwellers of this region, struggling for survival, may have guns but no tanks; they possess rockets but no aircraft. How they can outgun nations armed with sophisticated weaponry remains an unresolved mystery. In point of fact, the much-vilified Muslims are caught in a ruthless power struggle among mighty powers, which are trading on their predicament without qualms. The victim of sinister conspiracies, they are being divided along sectarian lines and subjected to communal massacres. Certain forces that have been at work to pit the common people against religious scholars and defame Islam must be exposed to prevent further bloodshed of the innocent.

It is unfortunate that the killers hired by outsiders for eliminating their compatriots are ignorant of the motives behind the never-ending trail of death. As the conspirators are intent upon massacring the Muslims to achieve their nefarious designs, we are required to unite like a house on fire to scuttle their contemptible plans. In compliance with Islamic teachings, we must demonstrate unity in boldly taking on the enemy before things spin out of our control. — (Sept 18)

– Selected and translated by Syed Mudassir Ali Shah