Two leading think tanks criticised fuel price hike on Wednesday, calling it “an unreasonable and wrong political decision” that would “create a big burden for the poor” and put pressure on the economy.
But an adamant Finance Minister AHM Mustafa Kamal defended the move, arguing that it was necessary to continue development work.
“The price hike is fully justifiable,” he told reporters after a virtual meeting of the cabinet committee on economic affairs on Wednesday. “Where will the government get money if fuel price is not increased?”
Last week, the government raised diesel and kerosene cost by Tk 15 per litre, a 23 per cent hike, citing rapid fuel oil price hike in the international market, prompting transport strike and subsequent public suffering. The price of furnace oil has also been raised to Tk 62 per litre from Tk 59, a 5.1 per cent increase.
“Such price hike refers to an increase in costs of transportation, agriculture and electricity – all contributing to the rise in overall costs of living that will hit end consumers hard,” Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said in her keynote presentation at a media briefing on ‘Fuel price hike: How necessary was it?’
At a separate webinar, South Asian Network on Economic Modeling (SANEM) Executive Director Selim Raihan said the current fuel price would hit daily essential products that would create additional pressure on the poor.
“It was not difficult for the government to come up with financial assistance for the fuel sector since it provided incentive packages for different industries to overcome the pandemic shock,” he said.
Minister Kamal said the mass people would have to bear the burden of increased fuel price to some extent as the government needs money to finance development projects.
“The consumers have to share some of the burdens, while the government bears the rest. The government has to earn money from the taxes... This is an easy equation,” he said.
Admitting the impact of fuel price hike on public life, the minister said, “We admit it. Even then, when prices get lowered we too lower the price and vice versa. We will brief on the fuel price hike after the next week’s meeting of the cabinet body. We will inform you how much the [oil] price increased in the past two years and how much we have increased,” he added.
Fahmida argued that the rate at which fuel prices go up affects the market at a higher rate. Bus fare, for example, has soared by 50 per cent.
Considering fuel a strategic commodity, she said any loss incurred by the Bangladesh Petroleum Corporation (BPC) can also be adjusted from the profits it accumulated in the last seven years by selling fuel at prices higher than those in the global market.
“We do not see any scientific method in the pricing mechanism,” she said.
The World Bank forecasts a downward movement in fuel prices in 2022, and keeping the prices under control and focusing on recovery should be government’s prime concern now, the CPD said, urging the government to renege on its decision and reinstate the previous price.
Fahmida asserted that the price hike of diesel and kerosene came at a time when prices for daily necessities were already exhibiting an upward trend. Prices of several commodities shot up in November 2021 compared to the corresponding period of FY21.
CPD Distinguished Fellow Professor Mustafizur Rahman described the decision to raise fuel prices as utterly wrong from all points of views – economic, social and political.
“The step to hike fuel price is not positive for the economy. People’s incomes have decreased and they are struggling to survive during the pandemic period,” he said.
“A 26.5 per cent increase in bus fare against the 23 per cent rise in fuel price is totally unjustified when fuel covers only 40 per cent of the total costs of operating a bus.”
Bus fares could have been raised by a maximum 10 per cent, noted Prof Mustafizur.
CPD Research Director Dr Khondaker Golam Moazzem held that the government could easily cover its possible loss of Tk 7,200 crore by withdrawing 34 per cent tax on the petroleum import. “The government has a plan to earn revenues of Tk 7,808 crore from tax on the import of petroleum fuel,” he said.
When asked about BPC’s not lowering fuel price despite making a profit of Tk 43,000 crore, Minister Kamal said, “What would the government do with the money? The government is not running the safety net projects minting money. The government has to run the country by earning.”
On reconsidering the transport fare hike, the minister said, “I need to know first the reasons behind the price hike. If I find that fares were increased without any ground, there are scopes to reconsider the issue.”