The big rise in fuel prices
Chain effects in the economy will be formidable
THE government decision to raise the prices of petroleum products was inevitable. The record level of crude price in the international market and the consequent need for increasing subsidy to the Bangladesh Petroleum Corporation (BPC) to procure it called for upward internal price adjustments to keep the deficit under control. But the margin of price increase by 33.84 percent to 50 percent from previous levels on wide ranging petroleum products is a big quantum leap at one go is what draws instant flak. Is the economy with near-double digit inflation ready to absorb the consequent shocks?
This is bound to leave an adverse fallout on the economy on quite a few counts. The transport costs will be higher, however much the government tries to keep the owners from raising the fares and freight costs disproportionately. Twelve to fifteen percent estimated increase in the cost of carrying goods per tonne may contribute substantially to the already high prices of commodities. Also, the higher fuel costs for irrigation will affect agriculture at a time when we are striving to raise productivity. All these will have chain effects in raising the cost of living.
The cash diesel subsidy for agriculture sector in the last financial year going to wrong hands, in many cases, the government will have to be extra cautious in distributing increased diesel subsidy in the current fiscal year. Considering the large mass of people who depend on diesel and kerosene in rural areas, government will have to increase subsidy to the poor so that in effect what is gained from a cut-back on subsidy to BPC is being lost any way.
There are two valid arguments that have never been sufficiently refuted by the government. First, if the import tax and excise duty on fuels were reduced, BPC's system loss and administrative cost regulated, and the government's own fuel bills were reduced through austerity then we could do without such a high rise in the fuel price. Secondly, whilst the rise in international prices triggers an increase in the domestic price, conversely the fall in the international oil price is never translated into reduction in the domestic price. This contradiction must be overcome.
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