As expected, fuel prices came down, something which members of the caretaker Cabinet had been boasting about as if it was the result of some piece of economic sleight of hand by them, or the result of dome extraordinary virtue that they possessed. The dip was made inevitable by the decline in the dollar, rather than in international oil prices, which meant that it was not the result of some fundamental shift, but of an essentially temporary market condition. The decline in the dollar is likely to continue for some time, and if oil prices hold steady internationally, that alone will bring about a decline in oil prices, expressed in rupees. It is perhaps unfortunate that the outlook for oil prices internationally is upward, especially with the predicted higher heating needs of winter in the Northern Hemisphere.
The fuel price is key to inflation at more than one point. Most directly, petrol and diesel prices determine transport fares. They also add to the cost of production of anything that has to be moved by road or rail. However, most crucially, they also decide what happens to the fuel adjustment charges in electricity bills. Since the country erupted into protests because of the bills month before last, that component, already sensitive, carries an even greater responsibility. It seems against the grain for a caretaker government to care about public opinion, but even though caretakers do not have to contest public opinion, they do want to be torn to pieces by angered mobs, and so do not wish public discontent to rise to too high a pitch.
Part of the problem might well be the IMF’s insistence on punishing conditions for its loans, but as IMF MD Kristalina Grigorieva told caretaker PM Anwarul Haq Kakar at their recent meeting, the rich should be taxed, not the poor. However, changing the taxation system is not something that caretakers are even mandated to do, even if they were inclined to. Only an elected government, and that too with a clear mandate, can carry out such a transformative scheme. It is not only a matter of soaking the rich; there are basic structural changes to the economy that must be carried out if the economy is to progress, which can only be carried out by an elected government. Even the present decline in the dollar has been carried out by administrative measures whose effects cannot last. The country’s fundamental problem is that it imports more than it exports. That cannot be fixed by caretakers.
