Fuel prices to rise: Muhith

The government plans to increase fuel prices this fiscal year to cut the pressure of subsidy on the national budget, Finance Minister AMA Muhith said yesterday. But he did not mention when it will take place.
The issue was discussed at a high-level meeting chaired by Prime Minister Sheikh Hasina at her office yesterday.
“In my budget speech I said we will face many economic risks this year. The risks were discussed at the meeting,” Muhith told reporters.
An official who attended the meeting said the government -- before hiking the prices -- will study the impact of the fuel price increase on the cost of living.
Hasina directed the finance division to do the study, the official told The Daily Star.
A detailed report on how much pressure subsidy puts on the national budget was placed at the meeting, said the official. The finance division recommended price adjustments to reduce subsidy on petroleum products and electricity.
An official of the finance fivision said that if more subsidy than projected is provided, it will create indiscipline in the budget. The budget deficit may rise to 6.5 percent from the projected 5 percent of GDP in the current fiscal year if the amount of subsidy exceeds the projection, the official added.
The meeting also focused on how bigger subsidy will increase the government borrowing from the banking system, ultimately fuelling inflation.
According to the finance and energy ministries, Tk 8,198 crore was counted in subsidies in the last fiscal year, as petroleum products were sold at a subsidised rate.
A total of Tk 5,000 crore has been allocated in subsidy for the current fiscal year. If the petroleum prices are not revised up, the subsidy may nearly double to Tk 16,000 crore this fiscal year.
In case of failure to adjust the prices of power, electricity subsidy may double to Tk 7,000 crore from the projected amount this fiscal year.
At yesterday's meeting, Hasina said: “Agriculture subsidy will not be reduced as it keeps the economy buoyant."
Hasina asked the related ministries to assess the impact that transport and other sectors will face if petroleum prices go up Tk 1 a litre.