People should know the truth rather than believing in conspiracies. #PetrolPriceHike was expected as crude oil prices were rising & this increase of Rs5.40 is actually lower than the increase in the cost of petrol. 1/N
The cost of petrol (base price) increased by Rs9.78. So, the govt actually reduced the taxes by Rs4.40 to not pass on the full increase
To give you the context, taxes on petrol are already the lowest where petroleum levy is reduced to zero & GST reduced from the standard 17% 2/N
Taxes on petrol are at Rs11.48, the lowest since Nov-18 & 9.72% of retail price, the lowest since recallable memory
Govt has set a target of Rs610bn for FY22 to be collected in lieu of petroleum levy. Now that it is reduced to zero, it could result in higher fiscal deficit 3/N
People need to understand this you're not getting a relief, when a govt subsidies petrol on the expense of a higher fiscal deficit. Cuz, it will result in a higher public debt & ultimately, it will be borne by citizens
Media should report correctly to convey the actual facts to the public rather than giving headlines of a “Petrol Bomb” by the govt. Yes, the retail price is at an all time high, so does the cost of petrol. Taxes on petrol are at historic lows
And, prices are lower in Pak
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NEPRA is the authority which sets the tariff for generation, transmission, distribution licensees and end consumers 1/N
There are two cost components to Generation tariff: i) energy purchase price (EPP) ii) capacity purchase price (CPP). EPP includes fuel costs whereas CPP includes debt recovery for setting up plants
If actual output rises above its potential level, it results in a positive output gap
So, we can see that Pakistan was on the path of overheating prior to FY19 & that was followed up by demand-pull inflation & higher interest rates by SBP
The world bank classifies economies into four income groups:
Low-income, are those with a GNI per capita of $1,045 or less; lower middle-income, are between $1,046 & $4,095; upper middle-income, are between $4,096 & $12,695; high-income, are of $12,696 or more
An increase in REER implies that exports become more expensive & imports become cheaper; therefore, an increase indicates a loss in trade competitiveness