Fuel prices hiked | The Daily Star
12:00 AM, September 19, 2011 / LAST MODIFIED: 12:00 AM, September 19, 2011

Fuel prices hiked

Effective from today; target to cut subsidy by Tk 3,500cr

The government yesterday hiked fuel prices by a maximum of 19.04 percent a litre to reduce subsidy on imports of petroleum products, said a top official of Bangladesh Petroleum Corporation (BPC).
The price hike came into effect last midnight, said BPC Chairman M Muqtadir Ali. In line with the new rates, prices of diesel, petrol, octane and kerosene will jump by Tk 5 and furnace oil by Tk 8.
Bangladesh increased fuel prices for the second time in more than four months in a move that economists fear will fuel inflation.
Usually, the prices of petroleum and energy products are increased through public hearing at Bangladesh Energy Regulatory Commission (BERC), but this time the process was bypassed, said Syed Yusuf Hossain, chairman of BERC.
The government can increase the prices of petroleum products through an executive order. Public hearing is not mandatory, Yusuf added.
“The hearing process is too long. That's why sometimes the government increases the prices of the products through executive orders," Yusuf told The Daily Star yesterday.
Asked about the reason behind the move, Energy Secretary Mesbahuddin Ahmed said the government is counting a huge subsidy on imports of petroleum products as the prices on the international market have recently increased.
The decision will cut the annual subsidy on petroleum products by Tk 3,500 crore to Tk 14,500 crore, said Mesbahuddin.
He, however, said the price hike will have a bad impact on people's daily spending, but there was no alternative.
Mesbahuddin said he has already met high officials of the communications ministry to take measures to increase bus fares in line with the fuel prices.
The government's borrowing from the banking system is increasing due to high subsidy on petroleum products, the officials said. The government has already borrowed Tk 5,000 crore from banks between July and August.
The government plans to import 70 lakh tonnes of fuel this year, up from 54 lakh tonnes last year.
Zaid Bakht, research director of Bangladesh Institute of Development Studies, said the fuel price hike was expected. ''Without price adjustments, there would have been serious budgetary implications,'' he said, warning about rising inflation.
Inflation rose to 11.29 percent in August from 10.96 percent in July due to an increase in non-food costs in the face of rising fuel prices, transport fares, clothing prices and household expenses.
''It is definitely going to have an impact on rising inflation,'' Bakht said. He warned that the fuel price hike will increase production costs in factories and transport fares, piling pressure on commodity prices.
He suggested that the government take steps to keep food prices stable through increased market intervention. ''The government must increase its market intervention capacity.”
The government last increased the prices of petroleum products on May 5.
Prior to yesterday's price hike, the government was providing Tk 33.44 subsidy for per litre diesel, Tk 32.49 for kerosene, Tk 8.02 for octane and Tk 12.96 for furnace oil, the government said in a statement.

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