Businesses worried at fuel price hike
A biker takes fuel at a filling station in Dhaka on Friday.Photo: STAR
Local manufactures, exporters and leading trade bodies yesterday said the recent price hike of fuel will escalate their production cost and erode competitiveness.
Their observation came days after the government raised fuel prices by Tk 5 per litre. The decision, in its second such move since September to trim the country's subsidy burden, came effective from Friday.
The price of petrol has been revised at Tk 86, octane Tk 89, diesel Tk 56 and furnace oil at Tk 55.
"The production and distribution cost at the garment sector will go up due to the increases in fuel prices, which will cut competitiveness," said Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association.
Mohiuddin said the export order for the products the factories are now making has been negotiated earlier. "They are making products at a fixed price. Now it will be tough for them to complete the production by buying diesel and furnace oil paying more."
Mahbub Hossain, general manager of Youth Spinning Mill, said the prices of other lubricants would go up following the price hike of fuel.
He said the industrialists and manufacturers have to increase the prices of their products to absorb the price hike. "Everyone in the market will increase the prices of their products."
"There are other related costs. As the food and transport costs of the workers will go up, they will demand wage and salary hike, which will add another cost to our production," said Hossain.
Luthful Bari, general manager of Meghna Rubber Industries, said international prices of raw materials are declining. "As a result, the prices of finished products are low in the international market. But we may lose our business to international competitors due to the rise in production cost."
He said they would also face problem in delivering the pending orders. "We fixed the cost on the basis of the past prices of fuel. Now we will not be able to increase the price."
Faizur Rahman, owner of Jessore-based Himalay Cement Factory and South Bengal Fertiliser Company, said their business cost would automatically go up.
"But we will not be able to increase the price of our products as the government sets the fertiliser price, and the cement market is so competitive that if someone hikes prices, he would definitely lose market. Our distribution cost will also go up."
Asif Ibrahim, president of Dhaka Chamber of Commerce and Industry, said: "As diesel price has increased, our cost of production will go up."
Ibrahim, also a readymade garment exporter, said the costing of their RMG products would go up, but the exporters would not be able to demand additional money from international buyers particularly from Europe and America, as their economies are under huge pressure.
"The manufacturers will have to pay the extra cost. They will have to look for other avenues."
The business leader, however, said compared to what is happening in the rest of the world, the price hike could not be termed as wholly shocking.
Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said the hike would directly create pressure at the consumers' level. Indirectly, it will affect the transport sector and production level, which will ultimately fall on consumers.
He said obviously the business cost will go up following the price hike. "The rise will depend on the percentage of the fuel of the total expenditure."
He said the price hike would have some pressure on the production cost of the export-oriented industries, which could undermine their competitiveness to an extent.
"Exporters are taking advantage of currency depreciation. Now if the government can make the port more efficient and give adequate gas and electricity supply then the businesses will perhaps be able to absorb the overall impact."
Our CU correspondent adds: Chittagong Chamber of Commerce and Industry President Murshed Murad Ibrahim expressed concern over the rise in furnace oil prices, saying the hike will increase costs in all sectors.
The CCCI president said, due to a rise in the prices of furnace oil, the cost of basic commodities as well as transport will now go up. The production costs in agricultural and industrial sectors will also increase.
The fuel price hike came a week after the CPD said the fuel oil price should be adjusted upward by at least Tk 10 a litre to reduce the mounting pressure on the state coffers.
The fuel subsidy could total Tk 18,000 crore at the end of the current fiscal year.
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