KARACHI, March 8: An increase in petroleum prices forces transporters and carriage contractors to enhance the transportation charges, thus pushing up the per kg price of vegetables by 50 paisa to Re1 per kg and it goes up to Rs2 per kg if labour charges are included.

Other essential items such as pulses, rice, flour, sugar, etc also become dearer by a slight 16-20 paisa per kg from crop area to wholesalers in the last two months. The cumulative impact of increase in petrol and diesel prices on essential commodities (from crop area to retailer) is estimated at 50 paisa per kg.

The transportation charges for a ten wheeler truck, loaded 200 bags of onion, arriving from Punjab, now comes to Rs15,000-16,000 as compared to Rs12,000 in November-December 2004. Similarly large sized truck owners now charge Rs32,000-35,000 for transporting onion, potato, etc., as compared to Rs22,000-24,000 two months back.

"Goods carriers make a straightaway increase in the cost of transporting goods at the same rate on which the government or the oil marketing companies raise the price of diesel or petrol," chairman Falahi Anjuman Wholesale Market, New Subzi Mandi, Haji Shahjehan said.

He said a small truck carrying 11-12 tons of onion, potato, etc., arriving from interior Sindh, charges Rs8,000 these day as compared to Rs4,500-5,000 in December 2004.

No matter how much cost is incurred by the goods transporters, wholesalers and retailers know how to recover this from the consumers by raising the prices of essential commodities.

Adviser to Karachi Wholesale Grocery Association (KWGA), Anis Majeed says that the transportation cost of bringing 25 tons of pulses or rice from Punjab comes to Rs16,000-16,500 as compared to Rs12,000-12,500 some three months back.

"We have estimated that wholesale price of essential commodities increased by 16-18 paisa per kg whenever petrol and diesel become costlier," he said. When it reaches to the retailers its cost goes up by 50 paisa per kg. He said that wholesalers have to pay the additional amount to the transporters.

The Oil Companies Advisory Committee (OCAC), a powerful cartel of Oil Marketing Companies (OMCs), had kept the price of POL products frozen from May 15, 2004 to December 15, 2004, on the directive of the government, to off-set the rising trend in global oil markets that might have further fuelled the inflation.

During the period, the government had to face revenue loss of Rs40 billion by bringing the petroleum development levy (PDL) to zero. On January 1, 2004 petrol was available at Rs33.78 while diesel and kerosene were available at Rs22.78 and Rs22.38 per litre. When the domestic prices had been capped on May 15, 2004, petrol, diesel and kerosene were selling at Rs 36.92, Rs 24.37 and Rs 24 per litre, respectively

In effect, petrol has become dearer by Rs10.18 per litre over the last 14 month (from January 1, 2004 to February 28), while diesel price has gone up by Rs5.43 per litre in the last 14 months. Kerosene price has also increased by Rs5.06 per litre in the same period.

However, the government's claim of controlling the inflation by capping the POL price from May 15, 2004 to December 15, 2004 gives a mixed feeling. Inflation in July 2004 was 9.33 followed by 9.25 in August, nine in September, 8.7 in October, 9.26 in November, 7.37 in December 2004, while in January 2005 it was 8.51 per cent. Analysts think that in February, the inflation must have recorded not less than eight to nine per cent.

Chairman SITE Association of Industry, Dr Mirza Ikhtiar Baig says that if the price of cloth is estimated at Rs100 per metre, the share of raw material is 60 per cent while the power cost comes to 18 per cent. It is estimated that any increase in fuel rates inflates the cost per metre of a cloth by Rs2 per metre or two per cent.

Ex-chairman of Korangi Association of Trade and Industry (KATI), Shaikh Manzar Alam said that whenever the OCAC in creases prices, transporters of raw materials, chemicals and other goods quickly enhances the rates, thus making a negative impact on the cost of production.

Usually industrialists, whose products find way into the local markets, make a slight increase in prices to cover up the losses while the exporters of textile related items face problems whose shipments are destined in the competitive world markets in the post quota era from January 1, 2005.

"Any increase in POL prices makes an impact of 5-10 per cent in the production cost of the items," he said. He said he was shipping towels at the rate of $2.75 per pond in December 2004. The same buyer is now paying two dollar for the same product after the start of free quota regime.

Alam said that time has come that the government takes urgent steps in curtailing the cost of business especially for the exporters otherwise export targets and GDP growth rate are likely to be hit.

Commenting on increase in POL prices, he said it is most astonishing thing that the dealers' commission and companies' margin is calculated on the basis of sale price of petroleum which also includes the general sales tax.

It is also strange that the government is unable to contain the profits of oil companies which range between 170-250 per cent. The tax component of POL prices has got to be reduced to achieve export target and sustainable economic growth.