‘Hike in fuel price could have been avoided’11 August 2022
Staff Reporter :
The latest record hike in fuel oil prices could have been avoided; instead the government chose to pass on the huge cost on the people with knock-on effects on transportation, agricultural production and surging inflation, the centre for policy dialogue (CPD) has said, suggesting immediate reconsideration of the price hike.
It said the government had lost its fiscal space due to lack of institutional reforms needed to reduce corruption and improve resource mobilisation, resulting in the abrupt hike in fuel prices in a wide margin at one goes when global crude prices moved downward.
Given the fuel price hike is likely to stoke the already difficult inflationary situation, the government must provide immediate support to the poor
and limited-income households across the country, widening the open market sales (OMS) programme and increasing the number of ration cards.
"Not only extreme poor and poor, now fixed income people are hard-pressed and in need of social safety coverage," CPD Executive Director Dr Fahmida Khatun said at a programme, stressing that the distribution mechanisms should be made strengthened to make sure targeted people get the benefit.
Since cost of doing business is expected to shoot up, it will become difficult for micro and small businesses to stay afloat, she said as she noted that big businesses benefited in many ways from stimulus and relaxed loan repayment which eluded small businesses.
Experts and stakeholders participated in the Media briefing titled "Record Fuel Price Hike in Bangladesh: Could It Be Avoided" said that the latest fuel price hike would put the appeal industry in multiple crisis and the food security may face may face further trouble over high cultivation cost.
"Inflating is 7.5% and price of some products have been increased up to 40%. Given such situation, the latest oil price hike will fuel the inflation further," said Dr Fhamid Khatun while presenting the concept paper.
She said due to the fuel price hike, the cost of transportation i.e.-buses, trucks and covered vans, water transport and Railwyas increased.
"General people will suffer the most. Many people have not yet recovered from the impact of the Covid-19 pandemic. Many people are eating up their savings. Rather than relieving them, stress is being created," she added. Dr Fahmida Khatun said it has not been considered in fuel price hike how low income people will survive who live on their wages and hands to mouth.
CPD Executive Director went on saying that they the subsidy is not a skilled economic tool; it encourages wastage of asset. Poor and well-off gets the benefit equally.
"We are telling to waive the subside whether it is for the IMF's condition or not. But it has to be done step by step," she said.
Dr Ijaz Hossain, Former Professor, Bangladesh University of Engineering and Technology (BUET) said that We have been telling the government to remove the subsidy for long time, ---but that does not mean such sudden price hike.
"The price hike came at a time when people are already vulnerable with commodity price hike and inflation. The price is such abnormally higher that we are not even getting any logic," he said.
"The government could waive taxes on fuel in this worst economic times of the country. Instead, an indirect tax has been imposed on the common people by increasing the prices. It is terribly discriminatory. Nothing will happen to the rich, the poor will suffer severely," he added.
Fazlee Shammim Ehsan, Vice President at Bangladesh Knitwear Manufacturers & Exporters Association (BKMEA), said that the use of diesel has increased in factories due to lack of gas supply which was already a costly option for us.
"But it would not be feasible for us to buy diesel at the new rate and run the factory because we are not in a position of burgeoning with the buyer in the international market."
"Sales have dropped remarkably in last two months due to the worldwide economic recession. So, this price hike has put us in a terrible situation, he added.
Talking about the indirect impact, Fazlee Shammim Ehsan said that workers may leave job due to high urban living cost and the low income.
Attending the event, former agriculture ministry secretary Anwar Faruque said, due to the rise in the price of diesel, the cost of cultivation per bigha of land will increase by Tk1,000.
Farmers will be in big loss if they are not provided a fair price of the paddy. So, to encourage farmers and ensure food security, the government needs to announce a premium price to procure farmer production," he said.
There are around 15 lakhs agricultural machinery, 75 percent of which are diesel powered.
"Fuel oil should be supplied there at least at the previous price. There is no scope for subsidy waiver in agriculture. If the production of paddy is interrupted, the country will be in a big disaster," he further added.
"Subsidy management does not mean putting the burden on the consumer, but about reducing wastage," he said.
Talking about the BPC's last seven years' profit, Dr Khondaker Golam Moazzem said that "Where did BPC Tk 39,000 crore profits go? Transparency of their income and expenditure
needs to be ensured. Even if it was for the IMF, the BPC had the financial ability to continue for a while without pushing pressure on the consumer.