Private think-tank Centre for Policy Dialogue (CPD) says an abrupt hike in fuel prices amid the ongoing coronavirus pandemic makes no economic sense and suggests its reversal to help the recovery process.
Bangladesh Petroleum Corporation (BPC), the state-owned fuel-importing agency, raised prices of diesel, kerosene and furnace oil at the retail level substantially with effect from zero hours on November 04, 2021.
Fired up by its cascading impacts, transporters on roads and highways and waterways went on wildcat strikes to press for cancelling the jacked-up rates of fuels or increasing their transport fares. The government opted for the latter to break the deadlock.
The CPD in a media briefing said the hike is not consistent with government policies and ethically it cannot be accepted.
The oldest private policy think-tank in the country said this increase in the prices of the petroleum products is not a "politically enlightened decision".
Its top executives, as such, urged the government to reinstate the previous prices considering its double-edged adverse effects on people as consumers and businesses as producers-suppliers.
In an in-depth analysis the CPD shows such hikes at a juncture predominated by recession at home and across the globe will have both immediate and medium-term impacts on various sectors of the economy.
Under its flagship programme Independent Review of Bangladesh's Development (IRBD), the CPD organised the latest media briefing on 'Fuel price hike: how necessary was it?' The briefing was held in its dialogue room through hybrid system -- some journalists were allowed to join in person and some through zoom.
Executive director of the CPD Dr Fahmida Khatun made keynote presentation at the media meet. She said prices of diesel and kerosene had been increased to Tk 80 a litre from Tk 65 -- indicating a 23.1-per cent rise.
The price of furnace oil has also been raised to Tk. 62/litre from Tk. 59/litre -- a 5.1 per cent increase.
She said the price hike of diesel and kerosene came at a time when prices of daily necessities were already exhibiting an upward trend. Compared to the corresponding period of FY21, prices of several commodities shot up in November 2021 (based on TCB data).
The CPD takes with a grain of salt the inflation data provided by Bangladesh Bureau of Statistics (BBS). It only shows "marginal increase in point-to-point basis and declining trend in moving-average basis (up to September 2021)", the ED stated in her paper.
"This appears to be quite detached from the actual scenario on the ground and raises questions regarding the reliability of inflation data," the economist told her actual-virtual audience.
She said the fuel-price hike implies that there will be an increase in transportation cost, agricultural cost and electricity cost.
"All production costs will increase, leading to cost of living shooting up, and end-consumer will suffer."
In view of recovery from the adverse impacts of covid-19, stability of fuel price is critically important given the 'strategic' nature of the commodity, the CPD executive director noted.
While replaying a volley of questions from the media, CPD distinguished fellow Prof Mustafizur Rahman said this is not right time to increase the fuel prices.
He found a lack of political farsightedness [while taking the decision].
He said the burden has been passed on to the common people through raising the transport fares.
Dr Rahman said Bangladesh has been maintaining 'administrative prices' of the fuels for long in order to avoid its volatility on the international market. Hence this cannot be compared with the petroleum products' prices of Sri Lanka or others. Sri Lanka is an economy which frequently adjusts its prices keeping consistency with the international market.
He said the producers can pass it on to the end-consumers but the consumers cannot do it. "This is a strategic product having chain effect on all economic activities."
Dr Rahman, however, blamed the government as the BPC has weakened financially due to mobilization of funds amounting to Tk 100 billion from the state-owned oil-importing and-marketing organisation. The government amended a law in parliament to mobilise surplus money from the state-owned enterprises, especially from the energy-related companies.
While replying to the reports, CPD research director Dr Khondaker Golam Moazzem said that there were many options for the government to escape the price hike.
"If the government waives the import duty and VAT, then there is no need to raise the price."
Dr Moazzem said the government may have announced the amount as stimulus package for the welfare of the people.
It is believed that BPC needs extra Tk 73 billion to cope with the rising fuel-oil prices on the international market.
He, however, said there is need for strengthening the BERC [Bangladesh Energy Regulatory Commission]
Senior Research Fellow Towfiqul Islam Khan and senior research associate Muntaseer Kamal were also present at the briefing and responded to questions from the journalists.
jasimharoon@yahoo.com