Cheaper Petrol for Some, Expensive for Others: Are Owners of 800cc Plus Cars Rich?

Cheaper Petrol for Some, Expensive for Others: Are Owners of 800cc Plus Cars Rich?

If the government has its way, some would be paying Rs.372, while others would be paying Rs.172 for a litre of petrol in Pakistan. Is this fair?

In a recent announcement, the federal government has vowed to provide subsidized petrol to two-wheelers, three-wheelers and cars of up to 800cc engine. While all the details of this scheme are not known, what the government intends to do in the next 45 days is to provide Rs.100 per litre subsidy to a class of what it calls “low-income people”. However, initially, the government failed to disclose how it intends to fund this subsidy. 

A day after the announcement, the relevant minister announced that the “rich of Pakistan” will foot this bill. This sounds like the government intends to rob Peter to pay Paul. Also, this is likely to irk the International Monetary Fund (IMF), which expects the government to earn revenue through levying PDL, so it relies less on external sources of finance. 

Petrol Relief Package in Pakistan: Some Details

The government intends to play Robin Hood, perhaps to get votes in the coming elections and it has a plan, or so it claims. 

As already mentioned earlier, owners or riders of motorcycles, rickshaws and cars of up to 800cc, which includes Suzuki Alto, whose premier variant is currently priced almost Rs.2.8 million (any one who can spend this much on a subcompact hatchback in today’s economy is NOT poor, we believe) will be eligible.

So how does the government differentiate between the “rich” and “poor”? 

The government claims it has made this decision based on the data collected from registered motorcycles and cars, CNIC and the mobile phones. 

How much petrol will the “poor” get at discounted rates per month?

Motorcycle riders will be able to get cheaper petrol worth 21 litres per month, while the “poor” person driving a Rs.2,800,000 Suzuki Alto will be entitled to one full tank. What they will do once they’ve run out of their monthly quotas is not the government’s headache or so it seems.  

How will it work at the petrol stations?

You cannot register yourself in this scheme. The government will do it on its own. Once selected, the government will send you a text message on your mobile phone based on which you can register yourself in this scheme. Once registered, you’ll get a code which you can show at the petrol station and get discounted petrol. 

Why Robbing Peter to Pay Paul is a Bad Idea? 

First, those who are actually running the finances of this country. No. Not the Federal MInistry of Finance but the IMF. They are already not pleased, to say the least. They still haven’t released the much-awaited tranche, without which the country teeters on the brink of default. Angering them more now will further delay its release, if not worse. 

Second, and most importantly – not every motorcycle rider is poor and not every owner of a Suzuki Cultus or Wagon R is rich. If they were, they would still be buying them. Instead, according to the latest PAMA statistics, there is a clear year-on-year and  month-on-month dip in the sales of these two cars. 

Third, why not provide discounted diesel? Agriculture is the backbone of this country and the farmer is already reeling from high commodity prices. Most of the farm machinery is run on diesel, whose per litre price is Rs.293. If farming remains an expensive profession, staple diets like wheat, rice and others will continue to cost more, leaving many malnutritioned. Recently, there have been incidents of “flour rioting” in which people have died while collecting flour being sold at discounted rates.  

What’s more, the government’s data collection could be faulty. Some very rich traders in Karachi, Lahore and other cities having businesses in the old city areas use motorcycles rather than cars. 

To conclude, the government may have good intentions at heart, but it has a faulty notion of who is rich and poor in Pakistan. On top of it, the data collection in this country isn’t always accurate. In its quest to help Paul, the government may be robbing Peter, who has already lost a lot due to the constant Rupee devaluation in the last many months and may not have much more to lose. The Petrol Relief Package in Pakistan is very likely to be challenged in the courts. 

We are interested in hearing your thoughts on this subject. Do leave a comment. 

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