The government's much-hyped automated petroleum pricing has fallen short of expectations of most experts and economists. The plan was to introduce a mechanism that would regulate fuel prices in accordance with the rise and fall of fuel prices in the international markets. Sadly, that has not happened. The price per litre of diesel-kerosene was Tk 109 before and it has now fallen by a paltry Tk 0.75 to Tk 108.25. Similarly, the price of petrol used to be Tk 125 and that has fallen to Tk 122 per litre, whereas, octane price (per litre) has declined by Tk 4.0 from Tk 130 to Tk 126. This is hardly what was expected and there are major reasons for disappointment.
It is understood that the introduction of the new system is a condition set by the International Monetary Fund (IMF) in connection with its latest loan package to Bangladesh. The IMF loan carries some comprehensive reforms to be implemented by the government and automated fuel pricing is one of them. The relevant authorities have always been reluctant to execute this type of reform measure. But this time they have no choice because the bailout is crucial not just to the economy but also from a credibility point of view.
Questions have been rightly raised about the process of readjusting the prices of petroleum products. Where is the transparency? Why does not the relevant ministry make available the pricing formula for public scrutiny? It is ironic to state that when the government raised prices of octane, diesel, kerosene, petrol and octane by an average of 42.5 per cent back in August in 2022, did it consider the relevant issues duly? What would be the impact of such a drastic action in one go? Apparently not. That fateful decision pushed the cost of production of basic goods including all farm products through the roof. Similarly, it caused a severe spike in the cost of production of electricity as a very significant portion of electricity generated in the country is based on liquid fuel-fired power plants.
People were hammered by sustained high inflation, which had already been running high before this price adjustment and their collective woes were compounded further by an increase in production costs at industry level. Some price-sensitive products including packeted goods like confectionary, soft drinks, chips, etc. experienced 'shrinkflation', which is a reduction in the weight of products sold in packages whilst keeping the price same. This shrinkflation phenomenon has now become commonplace in consumer products in the country. Can industry be blamed? Not really, because raising the retail price of certain items is not an option and this phenomenon has become an industry standard whereby all major players follow a certain pattern. As one moves to the agriculture scenario, things get wild and scary. It is not just market syndicates that are driving up prices. Every single agro-product grown in fields require irrigation, most of which is done by diesel-run pumps. The rise in cost of inputs, leading to higher cost of production is offset by a manifold increase in price of products at consumer level.
Now that the government has introduced a system that is supposed to work in conjunction with international market prices, the demand for all and sundry is that it should be done in such a way that consumers are duly benefited from it or bear the brunt of the fluctuations in fuel oil prices internationally. What is totally not acceptable is an attempt to manipulate the process so that Bangladesh Petroleum Corporation (BPC) deprives consumers of the benefit of any significant fall in prices, so that it may continue to enjoy abnormal profits at the expense of the entire consumer base of these fuels.
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