What rationale behind rising fuel price?

The principal reason cited for the price increase is the differential between import costs and selling prices. The energy minister has said that Bangladesh Petroleum Corporation (BPC) will incur an annual loss of Tk 1200 crore even after the price increase. At present the Corporation is paying Tk 2500 crore in import duties to the government annually. So one option open to the decision-makers is to reduce the import duties on fuel to cut down the losses of BPC, but it has not yet resorted to this measure. Hopefully they will, in the next budget, but the increase effected in the prices will rule.

Though the energy minister has claimed that the increase in fuel prices will not lead to further inflation, his claim seems assailable. The country will have to brace for the negative impact of price increase. First, it will raise the costs of irrigation-based agricultural production, hitting the farmers hard. Second, at least ninety per cent of fuel consumed in the country is in the categories of diesel, petrol and kerosene whose users are the general people. So the poor masses are going to be the worst affected. Third, transport cost will go up as a natural corollary to the fuel price increase. Again, the common man will have to bear the brunt of it. Higher transport costs will also push the prices of different commodities up. Also, the price differential between diesel and kerosene could encourage the dishonest elements to indulge in adulteration.

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For obvious reasons, the question of providing agricultural subsidy has already arisen in view of the hardship that farmers will have to undergo. Hindsight should convince us that this is an area where corruption is not easy to prevent. So keeping the fuel prices low is the best thing that the government can do through cutting down on import duty.