By Aflatoon
I want to begin by saying something nice, because the rest of this will not be.
Diesel fell by thirty-two rupees and sixty-three paisas a litre this week, from three hundred and ninety-five sixty-nine to three hundred and sixty-three oh six. That is not a gesture. For a man running a truck between Karachi and Lahore, that is the difference between a trip that works and one that does not. Whatever follows, the relief is real and it is large, and I am glad of it.
Now let me explain how it was achieved, because it is a small masterpiece of the Pakistani art.
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There is a thing called the crack spread — the margin between what crude costs and what refined diesel sells for. Internationally it has been running at about sixty-eight dollars a barrel.
The government convened four Karachi refineries, which between them make around seventy per cent of our diesel, and it was agreed that for pricing purposes the spread would be treated as forty-one and a half dollars.
Not because that is what it is. Because that is what would produce a tolerable pump price.
The refineries absorb the difference. The consumer gets the cut. The arithmetic closes.
And the petroleum levy was not reduced by a single paisa.
I want to be careful here, because the levy’s exact level is reported inconsistently — I have seen the diesel figure given as seventy-four rupees and change, then seventy-seven and change, and this week as eighty, with one account saying it rose again on the very day diesel fell. The daily mechanism moves it around and the notifications are not published in a form an ordinary reader can follow.
But on the one question that matters, every version agrees: it did not go down. The relief did not come out of the state’s share. It was not, so far as I can establish, on the agenda.
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Consider the elegance of it.
Faced with a fuel price the public will not bear, a state has three doors. It can cut its own tax. It can pay a subsidy from the budget. Or it can find a third party with a margin and persuade them to reduce it.
Door one costs revenue. Door two costs money. Door three costs nothing at all — nothing to the treasury, at any rate — and it can be announced as relief with a clear conscience.
We went through door three. Twice now, since the war began.
The refineries did not refuse, and I doubt refusal was really available. When the prime minister’s office convenes a virtual meeting about your margin, the meeting is not a negotiation so much as a notification with better manners.
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There is a second bill, and it has already landed on people who were not in the room.
The oil marketing companies and the dealers bought their current stock at the old price. It has now been revalued downward beneath them by thirty-two rupees a litre. They will eat that difference on every litre in every tank.
These are the same dealers who, eleven days ago, threatened to shut every pump in the country and were bought off with a margin increase of one rupee thirty-four. That increase has now been comprehensively undone by a stock loss nobody consulted them about.
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Let me put the whole week in one sentence, because it deserves to be seen whole.
The government raised diesel to three hundred and ninety rupees on Tuesday, let it climb to three hundred and ninety-five by Wednesday, cut it to three hundred and sixty-three on Thursday by asking private companies to forgo profit, raised petrol on every one of those days, did not reduce its own levy at any point, and will present the result as relief — while Jamaat-e-Islami enters a fourth day sitting outside four governor houses asking for the levy to go.
Nobody has lied. Every step is defensible on its own. The refineries agreed. The relief is genuine. The levy is funding a deficit of 2.6 per cent of GDP, which is the lowest since 2003 and which I have praised in this column.
It is simply that at no point did the entity collecting the largest single component of that pump price consider that it might be the one to move.
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The arrangement, we are told, lasts “until the situation in the Strait of Hormuz improves and international oil markets return to normal.”
I have written elsewhere this month about that strait: five ships one day, none the next, against a hundred and forty before the war. Nobody sensible expects normal soon.
So the four refineries have agreed to subsidise the Pakistani motorist for an indefinite period, on behalf of a government that has not reduced its own take by a single paisa, in a crisis with no end date.
They will want it back eventually. They have already asked for the crude premium to be built into the formula. And when they come to collect, it will arrive as a price increase, and it will be explained by reference to international markets, and the levy will not have moved.
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Aflatoon is a satirist and observer of the Pakistani condition. His column, Intellectual Voices, appears in The Pakistan Daily.
