Fuel oil prices hiked again

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FE Report
The depreciation of Bangladesh Taka (BDT) against US dollar coupled with surging oil prices in the international market has prompted the government to raise the prices of petroleum products again on Friday, a top government official said.
Diesel, kerosene, petrol, octane and furnace oil are now costlier by Tk 5.0 a litre each as the government raised the petroleum prices through an executive order from midnight Thursday, said the official.
The new the prices of per litre of diesel and kerosene is Tk 61, petrol Tk 91, octane Tk 94 and furnace oil Tk 60.
This is the fourth hike of petroleum prices during the outgoing calendar year and third of the current fiscal year (FY 2011-12).
Since May, 2011 the government has increased the retail prices of diesel, kerosene, petrol and octane by Tk 15 per litre and furnace oil by Tk 18 per litre.
Despite the latest hike, Bangladesh Petroleum Corporation (BPC) will incur an estimated loss of Tk 17-18 per litre on the sale of diesel and kerosene and Tk 10 per litre on furnace oil, BPC Chairman Md Abubakar Siddique told the FE Friday.
Surging oil prices in the international market coupled with a sharp depreciation in the taka's value against the US dollar have escalated BPC's losses recently, Siddique said.
As the impact of Taka depreciation alone, BPC is incurring more losses than what it had suffered before the previous price hike in petro
government to increase the fuel prices, as it had no other option in the context of a significant amount of subsidy it is giving to the sector," the MCCI chief said.
He, however, observed that the enhanced fuel prices would make further adverse impact on sectors like agriculture, shipping and transport. But the people have to accept it, as the government is in trouble regarding the matter.
President of Dhaka Chamber of Commerce and Industry (DCCI) Asif Ibrahim said the government must get rid of the burden of the substantial amount of subsidy, now being given to fuel sector.
He, however, said the government could raise fuel prices later, considering the soaring inflation at present, as the hike will further create pressure on national economy.
The DCCI chief raised question whether the government has any mechanism to address the current economic pressure, and suggested to discuss the mechanism and policy measures with all stakeholders.
He voiced his concern over further reduction of profit margin of the export-oriented industries, as their production cost will go up following the oil price hike, and they will lose competitiveness in the global market.
Former adviser to the caretaker government Akbar Ali Khan said the price hike of fuel oils would contribute further to the already soaring inflation.
"The price hike of fuel oils will have more indirect effects on the economy than direct ones," said the economist.
A B Mirza Azizul Islam, another former adviser to the caretaker government, said different sectors and services relating to energy consumption, like transport, agriculture etc, will be costlier following the fuel price hike.
He said although the price hike of fuel oils was inevitable on the part of the government to cut borrowing from the banking system due to the rising amount of subsidy, it would create extra burden for the fixed-income group of people.
A bdnews24.com report adds, Bangladesh Institute of Development Studies (BIDS) researcher Zaid Bakht said the government could cut expenses by reducing funds for 'unnecessary' projects undertaken for political reasons.
Slamming the timing of the hike, Mr Bakht said, "People are already burdened with high inflation. And after this hike in oil prices, transport fares will be increased further, which will lead to more inflation."
Asked about the reason behind the hike, he said, "The government is under pressure. It has to subsidise more than the target set in the budget, so it has to cut expenses.
The demand of fuel oil almost doubled in the current fiscal, Bakht said. "The demand was 3.8 million tonnes in the last fiscal year, which went up to 7.0 million tonnes this fiscal," he said. "It actually increased due to supplying fuel oil to rental power plants."
He said prices of fuel have not gone up in the international market. "The finance minister himself is concerned over the inflation rate," he said.
Asked to comment on the latest hike in fuel prices, BGMEA chief Shafiul Islam said: "Inflation will rise (after) the hike in prices of fuel oils, daily expenses of workers will rise, transport cost will rise - altogether, our production cost will rise."
He said the present situation is 'unbearable' for both the government and businessmen.
"The government has no way but to raise fuel prices to reduce subsidy," Shafiul said.
But with Bangladesh's economy not in pinkest of health, and Europe and the US swimming amid "economic depression", he said in this scenario it will be "difficult to hold market once production cost increases".
"I feel the government should think more on this issue," he added.