Once again the government is planning to increase fuel oil prices. All indications suggest that the price hike was being mulled in order to make up for additional losses estimated to be Tk 10 billion a year as the National Board of Revenue (NBR) increased the tariff for crude petroleum oil.
Crude oil price was raised to $40 a barrel from $32 and for refined petroleum products to $0.40 cent a litre from $0.31. But the Bangladesh Petroleum Corporation (BPC) is yet to decide the rate of increase. Earlier, Finance Minister AMA Muhith said late last month that the government had no plan to raise prices of fuel oil anytime soon.
There is no denying that repeated increases in transport fares and retail power tariffs result from frequent increases in fuel oil prices. This is happening during the last five years. It is pushing up the average cost of industrial and agricultural production on the one hand and the cost of living on the other.
In fact, the government has apparently failed to set up base-load power plants and allowed the rampant growth of the private sector in power generation, which has made the sector vulnerable not only in terms of unreliable supplies but also pushed the consumers into paying higher electricity bills, said some country's energy experts.
When international fuel oil prices are on the decline, Bangladesh is surprisingly raising it on illogical ground. Very recently, India has cut petrol price by Rs 1.82 a litre, which was the third reduction in rates in a month. India followed the global trend while Bangladesh is set to go alone in the race.
The anticipated hike in fuel-oil prices is due to be effective at a time when the lower- and middle-income groups of the society are already otherwise overburdened with earlier hikes in diesel and kerosene prices by 38.64 per cent and that of retail power price by 60 per cent over the past two to three years.
A fresh hike of fuel oils will certainly have its profound impact on the price situation, particularly on non-food inflation. The consumption basket, as experts say, will be affected through squeezing of the buying-capacity of lower and middle-income people. The budget-cut by the fixed- and middle-income people for buying non-food items may impact the import trade as well.
Reports say the move to enhance the fuel-oil prices is being taken with a view to raising revenue by, at least, Tk 10 billion a year. However, the government is already making some profit from the sector. In order to generate more revenues, the government had earlier increased the tariff value of crude petroleum oil to $40 per barrel, up from $32 per barrel and that of other refined petroleum products to $0.40 cent per litre, up from $0.31 per litre.
As the BPC is still incurring losses, the government is shifting the burden onto the consumers by increasing the fuel-oil prices. This is a very usual trend. Showing the BPC as a loss-making concern, it raised the price of diesel and kerosene earlier by Tk 24 per litre, from Tk 44 to Tk 68, and that of petrol and octane by Tk 22 per litre in five phases.
There is no denying that such increases in the prices of fuels and in electricity tariff during all these years have significantly pushed up the cost of living of the common people. The costs of production and transportation also went up forcing people to buy commodities and services at higher prices.
In fact, each time prices of fuels were increased, buses, pick-ups, and auto-rickshaws increased fares, rickshaw-pullers, using that as an excuse, doubled their rates, the pullers of rickshaw vans also followed suit, and vegetable vendors raised prices on the ground of increased transport costs. The people faced similar chain-effects in transport fare and house rents; the prices of other goods and services immediately shot up.
Meantime, critics say the multinational capital donors do always pursue the government to withdraw subsidy from fuel and electricity to make the sector viable for private business. In exchange, the agencies provide assistance to the country, in support of the government's budgetary management operations and for development projects.
However, non-availability of low-cost fuels like natural gas and coal for power generation prompted the authorities to increase power generation from the fuel oil-fired plants. With all the fuel oil-fired power units running, the power board, the single buyer of electricity from producers in both the public and the private sector, can now supply up to 7,000MW during peak hours against the demand for over 8,000MW.
Owners and labour leaders in the country's transport sector have, of late, are unhappy over fresh bid to raise the fuel-oil prices. They say such hikes will make transportation of goods and passengers more costly. The government, according to them, should take necessary measures to check its existing system loss in the petroleum, power and energy sectors, instead of making any enhancement of their prices.
Before enforcing any hike in fuel prices, it is necessary for the government to assess the impact of such price adjustments on different sectors of the economy. The adjustment should be made in a manner so that such hikes cause less sufferings to the people.
szkhan@dhaka.net.