Fuel price hike to impact economy

The increase in diesel and kerosene prices has been met with harsh criticism, with many calling it an “anti-people decision” which will have a lasting negative impact on the economy.

“It will impact the overall economy,” Prof M Shamsul Alam, adviser to the Consumers Association of Bangladesh (CAB), told The Business Post. 

Diesel and kerosene prices were hiked by Tk 15 on Wednesday. A day later, the retail price of 12kg LPG (liquefied Petroleum Gas) was raised by Tk 54 to Tk 1,313.

Meanwhile, bus fares were increased between 35 per cent and 40 per cent on different routes in the capital. Bus passengers expressed their utter dissatisfaction over the abrupt fare hike without prior notice from the government.

Besides the capital, long-haul bus service companies also hiked fares abnormally, putting extra pressure on already sandwiched bus passengers.

For instance, Dhaka-Naranganj bus service companies like Bondhon and Utsab charged Tk 50 yesterday for one-way travel, from Tk 36, it was alleged.

Economists and general people fear this move will push up the prices of everything overnight, which will be an unwelcome development as the economy is recovering from the coronavirus pandemic’s shock.

Industrialists say the price hike will also raise the production cost. Bangladesh Knitwear Manufacturers and Exporters Association’s Executive President Mohammad Hatem told The Business Post that the diesel price hike would impact the overall RMG sector.

“Transportation cost will increase and export-import costs will rise,” he said, adding that the government should have discussed the price hike issue with them. “We are considering sending a letter to the government in this regard,” he added.

Prof Alam said a rise in fuel price reduces the purchasing capacity and increases overall expenditure, affecting the market as well as VAT and tax collection. It will also affect the annual budget target completion, he explained.

Experts say the increased fuel prices would inflict more suffering on the people already bearing the brunt of the pandemic’s impact.

Prof Ijaz Hossain of Bangladesh University of Engineering and Technology (Buet) said the fuel price hike would increase the prices of almost everything overnight. “Once increased, prices are hardly ever reduced in our country,” he said.

The energy expert told The Business Post that the move may also raise electricity prices since many power plants still run on diesel. “This will negatively impact our agriculture sector as farmers use both electricity and diesel to run water pumps for irrigation. Low-income people who depend on kerosene are also set to face a dire situation,” Prof Ijaz said.

Meanwhile, several commuters alleged that transport owners have already increased transport fares. Naser Hossain, a driver of Raida Paribahan which operates in the capital, said that if fuel price went up, transport fares would rise. “This is normal. If the owners’ association decides to increase the fare, we will collect additional rent,” he said.

Bangladesh General Citizen Council convener Mohiuddin Ahmed said that the rise in LPG prices put pressure on the people. The diesel-kerosene price hike will increase the cost of agricultural products and public transport. 

“We have learned that gas and electricity prices will also be increased. The general people will feel the heat,” he said.

SM Nazer Hossain, vice-president of CAB said that rising prices of daily commodities, especially rice, sugar and vegetables, affected the people. 

“Gas and electricity costs have been hiked multiple times and the dollar’s price has also increased. The prices of TCB products, upon which low-income people depend, were also increased recently. And now, the increase in kerosene and diesel prices will adversely affect consumers,” said Hossain.

“People will suffer because traders will raise prices of everything in the pretext of increased transport costs. The government should reconsider the decision,” he said. Different political parties including BNP has demanded the immediate withdrawal of the new prices.