ISLAMABAD: The continued depreciation of the rupee against the US dollar is likely to trigger a new wave of inflation in the country, with prices of petroleum products likely to rise by Rs 13 per liter in the next fortnightly review on August 31. .
The exchange rate of the greenback has increased by Rs 12.08 from August 16, 2023 to August 24, The News reported on Friday.
This means that from September 1, petrol and diesel prices will increase only because of the exchange rate. However, prices of POL products and crude oil remained relatively stable in the international market. With only six days remaining in the current fortnight, further appreciation of the dollar is on the cards.
Petrol price has already increased by Rs 37.50 and diesel price by Rs 40 per liter in the last two fortnights. However, under the latest scenario, the interbank value of the dollar crossed Rs 300 with an open market value of Rs 314.
Industry sources have predicted that the purchase of crude and POL products at high US dollar prices will further increase petrol and diesel prices in the first fortnight of September, which may touch double digits.
If the prices are calculated against the dollar price on August 24, then the price of petrol will increase by 9 rupees 95 paisa per liter and the price of diesel will increase by 13 rupees 73 paisa per liter. However, if the dollar does not appreciate in the next 7 days and is not allowed to float freely, the price of POL products will increase by double digits.
Besides, LCs verification charges have also increased by 10%, from 0.5-1% 2-3 years ago.
Against this backdrop, Finance Minister Shamshad Akhtar and the central bank appear immobile and have so far done little to rein in the US dollar, which is not stuck under the terms of the International Monetary Fund’s $3 billion loan.
The impact of dollar appreciation will also be reflected in further increase in electricity rates due to monthly fuel adjustment charges and quarterly tariff adjustments.
Meanwhile, the National Electric Power Regulatory Authority (NEPRA) has already increased the basic tariff on various categories of consumers by Rs 3 to Rs 7.50 per unit with inputs from the Ministry of Finance and the Power Division.
The base tariff for FY24 was pegged at Rs 287 to the dollar with an inflation of 17 per cent, which is far from the ground reality as the inter-bank dollar has touched Rs 300.33 with an inflation of 28 per cent.
The questionable base tariff on the lower dollar value will increase the tariff every month under the FCA head and every three months under the quarterly tariff adjustment. This will make the lives of the countrymen more miserable.
The government has already indicated its intention to increase the tariff by Rs 2.07 per unit due to the FCA adjustment in July 2023.
Under the law, fluctuations in fuel prices are passed on to consumers. Nepra will soon give its decision on the impact on tariffs for the last quarter of FY23. The government has demanded a tariff hike of Rs 5.40 per unit on top of the last QTA of FY23 and wants to reverse the impact in three months.
To mitigate the price shock to the public, the government wanted to shift the impact of the last quarter adjustment of FY23 to the six months of winter season from October 2023 to March 31, 2024. Through this mechanism, the impact will be reduced to Rs.2. .31 per unit The impact of the third quarter adjustment of Rs 1.24 per unit for FY23 will expire in September 2023.
In winter season the power consumption is reduced from 10,000 to 12,000 MW and the bills automatically fall. Hence, the government wants to pass on the impact of the last quarter adjustment of FY23 to consumers in the next six months of winter.
However, given the uncontrollable dollar, Pakistani consumers may face further tariff hikes every month during the current financial year 2023-24 under the FCA, apart from the quarterly tariff adjustments. There may be a four-fold increase.
