June 29, 2010

The Rationale of Handing Over Pricing to Petroleum Companies

While the world celebrates a regressive trend in POL prices, we in the Motherland are burdened with yet more misery. The government and its lackeys in their infinite wisdom of absolutely nothing have decided to hand over the petroleum pricing mechanisms to the petroleum companies operative in Pakistan. Now the proponents of modern economics would “hail” this “historic move” which was “long overdue”. I beg to differ.

When OGRA was the deciding authority, at least we were in some peace that there would be some sort of controls and checks. The citizens could move the courts or something. Now what? There will be no checks on the pricing mechanism so we can expect to pay whatever the geniuses at Oil Corp. decide. The government has washed its hands clean of the whole affair. So what happens now? If anyone moves the court, the court penalizes the company, the company demands penalties from the government because it provided assurances that there will be no form of regulation, the consumers lose, and the government becomes even poorer because it keeps paying guarantees when it shouldn’t have to.

This is the dilemma; our dilemma. Lack of any form regulation on anything is madness. It is important for controls to exist so that some form of checks and balances can occur. If someone disagrees with me, I would suggest that they read up the case of Hubco Power Plant to know what happened. The company was charging unbelievable tariffs and when the government stepped in to ensure the delivery of energy at market prices, the World Bank and IMF suspended aid for development programs until the case against Hubco was resolved. Now I’m not suggesting that this is what will effectively happen, but there is indeed a very real possibility of it occurring; particularly in the absence of any sort of check system on the companies.

The government must ensure that the interests of the consumers are safeguarded because let’s face it, that’s what governments are for. Outright deregulation as is the case in this scenario is completely unfathomable.

Let’s wait and see what relief or un-relief this decision brings. My fingers are crossed.