Let’s forget, for a moment, what is going on in with the no-confidence movement.
Shall we not try to understand if our country is heading in the right direction under the present government? Is the government taking economic decisions which will truly benefit the nation?
Internationally, petroleum prices have significantly increased. Since the Pakistani Rupee has reduced about 40% of its value compared to the US dollar, petroleum has gone beyond the reach of poor to middle-class individuals. As of writing, the US dollar is trading at Rs. 180. The present government says that the previous government maintained the dollar price artificially, which is incorrect. The record shows that the caretaker administration maintained the dollar price during their short tenure. The PTI government also held the dollar price firm in his initial months before Imran Khan shared his vision about economic management. In his plan, he revealed the government would provide hens and eggs to the general public to build the economy at the national level. The next day after his speech, we started to see a bloodbath concerning the dollar price as it sent a clear message in the market that the government had no vision regarding the economy. That butchery is continued. Should this not be enough to judge the direction? If not, let’s move forward and continue to discuss the petroleum prices and their management by the present government.
The unemployment in the country is the highest in the history of Pakistan. Pakistan Institute of Development Economics (PIDE) recently reported that over 31% of youth are currently unemployed, and of this figure, 51% are females, while 16% are males, with many of them holding professional degrees. The household income in Pakistan remained almost static if not reduced in the past three and half years. The household income in Pakistan remained nearly stagnant, if not reduced. The salaried persons, especially the government employees, did not receive an increment to their salaries comparable to petroleum or dollar price. This all has made petroleum unaffordable for the poor and middle class. Considering the situation, the present government adopted an easy plan which does not require the government to make substantial efforts. They have started to provide blanket subsidies on petroleum, which needlessly benefit wealthy people. The government has frozen the petroleum price until the next budget session. It is a costly solution that is neither sustainable nor will provide any benefit continuously. The government estimated that it would require to pay Rs. 20 billion in terms of subsidy. However, because of the Russia-Ukrain war, the petroleum price volatility has increased. The petroleum import dealers in Pakistan believe that the government needs to pay Rs. 25 billion every fortnight to subsidise the petroleum price. This is a colossal waste of money and is likely beyond the capacity of the government to pay off. Foreseeing the situation, the dealers have reduced the import of petroleum, especially diesel, in the country. A severe shortage of diesel is emerging. Diesel will be in high demand in the coming weeks because of the wheat harvesting season. In usual months, the diesel demand remains at 0.7 million tonnes, which will increase to 0.9 million tonnes in the harvesting season. This poor management of petroleum prices by the government is likely to create another economic crisis in Pakistan. This flawed plan braces poor people to embrace another financial upset, ultimately leading to lawlessness.
The intelligent and visionary government would think twice to follow unsustainable and costly plans that ruthlessly waste taxpayers’ money at this scale. Blanket subsidy benefits rich people to travel on luxury vehicles on fuel costs shared by the poor taxpayers. At a minimum, the government can find ways to provide targeted subsidies to deserving people. Some portion of the allocated subsidy funds can be used to deliver ‘targeted’ assistance. For example, the government can install smart systems on petrol stations that would read vehicles’ registration plates and match owners in the national database. The petroleum rates will reduce automatically for fuel filling if owners qualify.
The targeted subsidy is also not a solution to address the problem comprehensively. Government must develop good alternative transportation means that people can use to travel. Those alternative means should help reduce the petroleum import bill, which is around $15 billion USD per annum. Pakistan exports goods worth $26 billion, whereas the import bill is $52 billion. This trade difference of $26 billion is keeping our country poor. We need to cover this deficit, which will make our country progress faster and join the index of rich countries. Besides taking measures to increase exports by providing IT services, the rulers should envision and implement projects on the highest precedence that will help reduce the import bill, particularly concerning petroleum. Otherwise, our country will remain in a vicious cycle.
Transportation and power generation in the country are the primary sectors that consume a significant portion of imported petroleum. We can significantly reduce consumption for transportation by expanding the mass transit network in metropolitan cities and intercity road infrastructure. For power generation, projects using alternative raw materials to generate power will help to reduce the import bill.
Unfortunately, the present government considers the Mass Transit System (MTS) a waste of money. MTS is not only fuel-efficient, but it also brings many additional advantages to the economy. According to research, every dollar invested in public transportation can yield around $4 in economic gains in the community. The equitable transportation system reduces the challenge of needing to bring cars on roads. It also contributes to achieving community health and wellbeing because less fuel burned means better air quality and environment. The mass transit system may cost Rs. 30-35 billion for each metropolitan city. This cost can be covered by utilising the funds being used to provide mammoth 25 billion subsidies every fortnight. Instead of wasting money on frequent blanket subsidies, build economic assets that will serve the country forever.
The pioneer Lahore MTP (Metro) cost was less than 30 billion, which was completed in 11 months. The overhead Rawalpindi-Islamabad metro was developed in 45 billion. Multan metro was completed in a short span with less budget. Though it was the most expensive and time-consuming project, the people also benefited from the Peshawar metro. Karachites are happy to use the green bus system. These successful projects are continuously providing the benefits listed above. The government cannot afford to close these projects as they are beneficial, and millions of people are using them to travel conveniently. Why would one stop developing these projects in the country? The present government has not planned any extension of the existing network or new MTP for other metropolitan cities. After having suitable transportation means to travel within cities, as a new revenue generation model, the government may implement time-based parking tickets to collect money from the elite who prefer to travel on their vehicles.
We have one of the world’s best road infrastructures for intercity transportation. The network of motorways in Pakistan has reduced the time distance between the cities, which is significantly contributing to fuel efficiency. When the motorway concept was introduced in Pakistan, the elite at that time opposed this project in the same way as the current government criticises MTP. Developing motorways brought a new transportation ecosystem to the country. After the M2 motorway, the Daewoo bus system started operating in Pakistan, which was a unique experience for the people of Pakistan. Following the footsteps, the local Pakistan transporters upgraded their system and now provide comparable services to people, if not better than Daewoo. The motorway policing was another new friendly experience for the people of Pakistan, which was later implemented across the country in different shapes and forms.
The motorway network was not a road initiative only. It was a complete economic turn-around package that also serves the defence needs. The plan was to establish industrial zones across Motorways with fast direct access to the ports. Unfortunately, the industrial zones could not be set up on envisioned scale and pace because of frequent interruptions in the continuity of the governments who conceived it. The previous government expedited setting up industrial zones through CPEC. However, the present government has almost halted progress under the CPEC initiative. We need to have factories established on the roadsides of the motorways swiftly so that the goods manufactured in the factories could be sent to ports efficiently, saving transportation costs and reducing the petroleum import bill.
Until 2013 the country was highly relying on oil to generate power. Therefore, the petroleum import bill was high. The government in 2013 realised this and started to develop projects that use alternative sources. In its five years, the then government developed projects based on the water, wind, solar, indigenous coal, run of river, LNG, nuclear, sugar cane, biogas etc. To build this Diamer-Bhasha Dam, the government first planned to get funding from the international consortium. However, because of the dispute between Pakistan and India, the global financial institutes refused to fund the project. The then prime minister announced to develop this dam using indigenous resources to send a message to the world that Pakistan can be a self-reliant country and completed the land purchasing for the Diamer-Bhasha Dam using its indigenous resources. Land acquisition is always the biggest hurdle in the water resource project. One of the controversies associated with the Kalabagh Dam is land acquisition. The present government could not achieve anything significant on this front.
The LNG-based projects installed in the last tenure saved billions of dollars in past years by reducing the oil bill significantly. The present government remained unable to install a single terminal to increase reliance on LNG despite announcing tens of times on media that the government is going to build new terminals. The government has done nothing on the ground. They have not taken a single measure that could reduce the import bill. In fact, they occasionally have prefered to use oil for power generation, which has cost Pakistan billions of dollars in loss. Do you think Pakistan is heading in the right direction? The answer is no. It is our choice if we want to stick with a ruler, who is apathetic and lacks vision, or we would want a better visionary leader?
The contributor, Dr Muhammad Abu ul Fazal, is a 4IR postdoctoral research fellow at the University of Technology Sydney. With extensive experience as a Project Director for the Pakistani government, Dr Fazal is the incumbent president of the PML(N)’s Australian wing.
Reach out to him @fazalsidhu.