The government has decided to provide motorcyclists with monthly financial relief of Rs2,000 instead of reducing the petroleum levy, while the Finance Ministry has reportedly refused to use Rs430 billion in available emergency funds for the purpose.
According to reports from the federal capital, the government has decided to provide limited monthly financial assistance to motorcycle riders to mitigate the impact of rising inflation in the country.
However, a proposal by some cabinet ministers to reduce the petroleum levy and cover the resulting revenue shortfall through the Rs430 billion emergency budget has reportedly been rejected by the Finance Ministry.
Prime Minister approves relief scheme
According to media reports, Prime Minister Shehbaz Sharif has formally approved the relief scheme, which will initially remain in effect for three months.
Under the scheme, motorcycle owners are expected to receive around Rs2,000 per month to help them cope with the impact of soaring petrol prices.
The Ministry of IT is developing a modern mechanism to ensure transparent distribution of the relief. However, the final amount will be decided by the prime minister.
Heavy taxes and size of relief
According to government figures, a tax of Rs106 per litre, equivalent to 28 per cent of the total price, is currently being collected on petrol, while Rs101 per litre, or 25 per cent of the total price, is being charged on diesel.
At current prices, the Rs2,000 relief is roughly equivalent to the cost of only five litres of petrol. Experts believe that if the scheme is restricted to motorcycle owners, it will do little to ease inflation affecting small-car owners and the wider public as a result of rising transport fares.
Claims over IMF objection and the facts
According to media reports, federal ministers had proposed using emergency funds to reduce the petroleum levy. However, the Finance Ministry resisted the proposal, arguing that such a move could affect the International Monetary Fund (IMF) programme.
The report, however, claims that the IMF’s third review report recommends using emergency funds to provide public relief and safeguard against fiscal risks amid prevailing economic uncertainty and the impact of the conflict in the Middle East.
In recent days, petrol prices have reportedly been increased by Rs30 per litre, while diesel prices have risen by Rs25 per litre, taking petrol to a record Rs376 per litre and diesel to Rs403 per litre.
In May, Petroleum Minister Ali Pervaiz Malik had proposed capping the petroleum levy at Rs50 per litre. However, the Finance Ministry reportedly disregarded the proposal and approved an increase in the levy to Rs80 per litre.
Public anger over the heavy taxes is now reportedly increasing. In this context, the Jamaat-e-Islami has announced a long march towards Islamabad on September 20.
It is also worth noting that during the previous fiscal year, a record Rs1.567 trillion was collected from the public through the petroleum levy, reportedly to cover shortfalls in Federal Board of Revenue (FBR) collections.
Critics question govt’s approach
From the perspective of an economic analyst, the government’s decision to provide Rs2,000 to motorcycle owners is a limited and temporary political measure that does not address the underlying difficulties faced by the public.
The Finance Ministry’s refusal to use the Rs430 billion emergency funds is being cited as evidence that direct public relief is not among the government’s key economic priorities.
Critics have also questioned how a reduction in the petroleum levy could threaten the IMF programme when the programme reportedly remained intact despite an FBR shortfall of Rs2.2 trillion.
The report argues that the government appears to regard indirect taxes, particularly the petroleum levy, as an easier source of revenue instead of pursuing structural reforms and increasing taxation on the wealthy.
Unless the petroleum levy is reduced to bring down transportation and production costs, such limited relief schemes are unlikely to address the economic and social pressure being faced by the public.
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