LAHORE: Prices will remain unchanged or rise further if the rupee is traded at its current value, oil rates will also continue to rise, interest rates will also remain twice the world average and utility rates will be also periodically improved.
Government officials are creating false hopes that prices will drop in the coming months. It is impossible for prices to fall if the above factors are not taken into account.
The only way to relieve people is to increase their income which compensates for the increase in prices. Incomes would rise thanks to a surge in the manufacturing sector which is currently on a downward trajectory. However, the results of the companies are excellent. The corporate sector is making money but not fulfilling its corporate social responsibility.
Large-scale manufacturing is dominated by a few investors. Many conglomerates have interests in sugar, cement, the energy sector, automobiles, textiles and, more recently, the real estate sector. They have created entry barriers for new investors.
These investors are now trying their luck in the real estate sector or the capital market. It is a dilemma that most companies listed on the Pakistan Stock Exchange make a lot of money.
Foreign investors stationed in the country are booming. Yet, no new investment comes from domestic or foreign investors.
As for prices, there would actually be big increases in some edibles used by the middle class. Apart from imported products, they will be forced to buy processed chicken products at much higher prices. Prices for packaged curd would also increase. Additional taxes imposed on small cars would also discourage middle-class families from switching from two-wheelers to four-wheelers.
High income groups would also be affected, but they have the capacity to bear higher expenses. The State should review its tax policy. The government, for example, increased the sales tax on oilseed imports from 5% to 17%. A few months ago, this same government reduced import duties on edible oils and oilseeds to reduce the cost of edible oil in the country.
The increase in sales tax that is paid on the value of duty paid will offset the impact of the earlier duty reduction. Edible oil is Pakistan’s second largest import after petroleum products. Edible oil prices would increase by Rs25-30/kg.
Although an agricultural country, Pakistan imports nearly 80% of its edible oil needs. More than 10 percent of requirements are met by cottonseed oil and the remainder by locally produced sunflower and rapeseed, canola (local seed production is just over half a million tons).
The government also imposed a 17% tariff on locally produced oilseeds. Local varieties hardly competed with imported seeds.
After this duty, imported seeds would be a little cheaper. Farmers would stop planting seed crops and national dependence on imported edible oils and oilseeds would increase further. Our edible oil import bill will also increase.
Drug prices have already increased on the market after the adoption of the mini-budget by the national assembly. It was news to most that 70% of pharmaceutical manufacturing in Pakistan is in the informal sector.
How did it happen? The Pakistan Drug Regulatory Authority fully controls the approval and prices of any medicine produced or imported into the country.
The manufacturing record of each company is also available. The Federal Board of Revenue (FBR) should have no trouble ensuring tax compliance for the country’s approximately 650 active pharmaceutical producers.
A report by the Institute of Chartered Accountants of Pakistan even pointed out that more than 50 pharmaceutical companies account for 90% of drug sales.
Are they not paying their due taxes? In fact, clinical laboratories, hospitals and doctors are mostly outside the tax net or pay nominal taxes. The total annual turnover of these three companies is much higher than that of pharmaceuticals. Most fees are in the form of the services they provide.
The government should open advanced skills institutes in collaboration with industries to produce the skills they need. These institutes should be run by the private sector without interference from bureaucrats.
Most unnecessary subsidies given to the poor should be diverted to human resource development. The skills imparted must be of a high standard to ensure that young people get immediate employment after deployment at 50% above the minimum wage.
Newcomers get higher salaries when they graduate from some industry-funded private sector skills institutes.