When the petrol prices went up just before the start of 2011, it was a sharp rise and a general hue and cry was raised; the federal government said they had nothing to do with price changes in petrol. The Oil and Gas Regulatory Authority (OGRA) was mandated to look at oil prices every 15 days and adjust them according to demand/supply conditions and international prices of crude oil. But lo and behold, as the pressure rose from other parties and the seat of the Prime Minister started to shake with the withdrawal of support from MQM, the federal government took back the increase in petrol prices. So much for the mandated position of OGRA and the process that had been set up.
Was OGRA wrong in raising prices? Clearly OGRA has been given the responsibility and the power to set oil prices, and it is indeed and should be the responsibility of the regulator, in all industries where the market is quite concentrated, to keep an eye on things and ensure that on the one hand consumer interest is not being undermined and on the other that producers are not shortchanged either. So, OGRA should be responsible for price setting. But then why did the government interfere and overrule OGRA?
If OGRA did not do anything wrong, the government should not have interfered. And if OGRA was wrong, then the government should fix what went wrong as well.
Most likely there was nothing wrong in what OGRA did. Price increase must have been warranted and OGRA was passing the increase on to the consumers. The government stepped in due to the political pressure. Clearly the oil companies are not going to foot the bill for the governments weak political position. So, what the reversal means, most likely, is that the government is going to subsidise the recent increase. But should the government be doing this when it has been cutting development expenditure and printing money to make ends meet. And we need money for flood reconstruction as well. But the government chose to subsidise the use of oil. Is this the best use of resources right now? Again, should the current governments political objectives be allowed to dictate policy?
The government, by its action, has also undermined the autonomy of OGRA and has caste doubts about OGRAs competence and ability to look after the interest of the people. By its interference, the government has also opened the doors for such action in the future. Anytime people do not like a hard decision, they will pressurise the government into reversing it. So, why have this decision with OGRA at all? Why not give it to Ministry of Petroleum, or better still, the Prime Ministers secretariat.
We cannot seem to move away from ad-hocism in policy making in Pakistan. The government talks of belt tightening and cuts in development expenditure but at the same time goes ahead and sets up another bank in the public sector. This, at a time when a number of banks are in trouble and we need consolidation in the banking industry at a time when the government is talking of its objective to privatise some of the existing assets in the public sector. And the State Bank, instead of exercising its autonomy that it has been guaranteed under the law, goes ahead and gives the new bank a license, while holding that banks should be consolidated and that Punjab should get rid of the Punjab Bank.
The sincerity of the people at the helm of affairs, not just of this government but also across the elite of the country and across all top positions, has to be questioned. People talk of rules and rule-based behavior but as soon as it is about them, they like to break the rules. If there is load shedding to be done, it has to start from rural areas and the poorer sectors of the city and then come to the richer areas. Why does load shedding not start from the President and Prime Ministers house and from all the GORs? The same for gas load shedding. If an austerity drive is to be started, let the Prime Minister and President cut the expense of their establishments by 50% and then ask others to do so. If taxes are to be imposed on the people, let the elites come forward and pay taxes first.
It is a simple situation in the country now. Rhetoric and words do not matter anymore. No principle has sanctity. No one believes anything that the government or anyone from the elite says. What matters are actions. If the government cannot get its act together and start acting on principles of good and honest governance, they are inviting mass disobedience. And this is what they should get. Governments that cannot make good policies, implement them, and stand on sound principles to look for the long-term development of the people, instead of trying to stay in power only, cannot expect allegiance from the people.
The writer is an Associate Professor of Economics at LUMS (currently on leave) and a Senior Advisor at Open Society Foundation (OSF). He can be reached at [email protected]
