Power, gas up for hike next
Power and gas are likely to become pricier next after diesel, kerosene and liquefied petroleum gas as the government looks to calibrate the prices in the local market following a global price spiral since July.
Last month, top officials of different ministries including finance, energy and power met to analyse the impact of the global price escalation on the budget.
"Increased oil prices will have a huge negative impact on commodity prices due to rising transport and production costs. People will continue to suffer. As the cost of transportation will increase, there are doubts as to whether consumers will get the benefits of winter vegetables this time around."
In those meetings, there were talks of raising the prices of power and gas as keeping those at the current level would entail huge subsidies, which the government might not be able to afford, The Daily Star learnt from people familiar with the proceedings.
For instance, a subsidy of Tk 6,000 crore has been assigned for importing liquefied natural gas this fiscal year. But as per initial estimation, Tk 20,000 crore to Tk 25,000 crore in subsidy may be required to keep the gas price at the current level, they said.
Energy and Mineral Resources Division Secretary Anisur Rahman acknowledged the development. But no decision has been taken in this regard, he told The Daily Star.
Earlier, it cost Tk 250 crore to bring a cargo of LNG, which is blended with the locally produced natural gas before distribution. Now, Tk 1,250 crore is needed.
"Managing such huge amounts of additional funds is now a big concern," he said, adding that the ministry has written to the finance division seeking funds for a cargo of LNG scheduled to arrive next month.
The import cost of LNG is now Tk 56 per cubic metre, so the average cost per cubic metre of gas has jumped to Tk 23 from Tk 12 previously.
"Prices hike will create a spiral effect. There will be negative impacts on industries, businesses, farmers and consumers. Queues of people behind OMS trucks will become longer. Living standards will degrade."
The government may need to give about Tk 20,000 crore as an electricity subsidy if the price is not adjusted, Rahman said.
"We must remember that the government is providing Covid-19 vaccines free of cost. If the fuel price is not raised, there would be an adverse impact on the budget," said a finance ministry official on condition of anonymity.
Economists criticised the government move, which comes at a time Bangladesh is emerging from the throes of the pandemic.
"Many sectors are still struggling and we do not know definitively yet that there won't be another Covid-19 wave," said Selim Raihan, executive director of the South Asian Network on Economic Modelling.
Hiking the electricity and gas tariffs along with the prices of diesel and kerosene would increase the production costs and fuel inflation further.
But the finance ministry official, quoting an internal macroeconomic study, said the impact of the fuel price hike on both food and non-food inflation may last only three months.
Raihan though maintains the government could have put off the decision by several months.
"Our recovery process would get hurt from inside -- at a time when the government support is badly needed," he said.
The government presented the losses the state-run Bangladesh Petroleum Corporation would be racking up as its rationale for raising the prices of diesel and kerosene by 23 percent -- and piling up the sufferings of the poor and the middle-classes, still reeling from the blow of the pandemic.
In the five and a half months to October, the government agency has incurred losses of Tk 1,147.60 crore for the surge in crude oil prices in the international market, according to the energy and mineral resources division.
The converse, however, did not hold for the BPC.
When the price of diesel was low in the global market, multilateral lenders like the World Bank and the International Monetary Fund and local think-tanks like the Centre for Policy Dialogue requested the government to reduce the fuel price accordingly.
But the government resisted.
Between fiscals 2014-15 and 2020-21, the state-run corporation had logged in profits of Tk 43,136 crore.
Rahman says the profit accrued in the past seven fiscal years are being channelled into five development projects: establishing Single Point Mooring with Double line project at Moheshkhali for safe unloading of imported crude oil, installing fuel pipeline from Chattogram to Dhaka and another jet fuel pipeline from Rupganj to Shahjalal International Airport.
The BPC's estimated outlay for the development projects is Tk 33,734 crore. Besides, in April 2016, the government had reduced the diesel price by Tk 3 per litre but the transport owners then did not bring down the fares.
"We will surely reduce the price of diesel if the price comes down in the global market in the coming months," Rahman said.
Nasrul Hamid, state minister for power, energy and mineral resources, echoed the same yesterday.
Asked whether the government would consider bringing down the tariffs on fuel imports like in India instead of going for a price hike, Hamid said the National Board of Revenue can take such a decision and not his ministry.
The government could have considered the loss from not hiking the diesel and kerosene prices as one form of stimulus, Raihan said.
Since many failed to get the earlier stimulus packages, the benefits of this round would have reached all.
"My hunch is that the government will backtrack from its decision," Raihan said, adding that the energy ministry's move on Wednesday was taken in a rushed manner.
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