VOL NO REGD NO DA 1589

Sunday, March 12, 2006

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EDITORIAL
 
Dilemma over fuel price hike
3/12/2006
 

          THE fixation of domestic fuel oil prices has always been an unpalatable task for any government since, for obvious reasons, the upward revision of the same is resented by the people. Moreover, the fuel price-hike does affect the costs of production and transportation and consequently the cost of living. Yet the government has no way other then making adjustments when the price of oil in the international market goes up. The incumbent government since its coming to power in October 2001 had to make similar upward adjustments of fuel oil prices on a number of occasions, the latest being on September 04, 2005.
However, such increases, according to multilateral donor agencies, were not enough to match with the same in the international market. So they have been consistently pressing the government hard to make further upward adjustments of domestic fuel oil prices. The adviser to the International Monetary Fund (IMF) for the Asia-Pacific region, who was in Dhaka last week leading a team of Fund officials, made a strong plea for further hike in fuel oil prices, following his meetings with the government and central bank officials. He argued that subsidised oil prices entailed considerable and growing costs to the economy and mainly benefited the higher income consumers, not the poor. But his plea was instantly rejected by the adviser to the energy division under the ministry of power, energy and mineral resources (MPEMR). The government does know well the cost the economy has to pay due to the selling of fuel oils to the people at prices lower than that of procurement. But the government is unlikely to make upward adjustment of fuel oil prices right at the moment, at least, for three reasons. Firstly, any price hike will badly affect the current Boro rice cultivation. Secondly, it will lead to further hike in the prices of essentials. And lastly, since the next general elections are round the corner, any move to raise fuel prices is likely to come under strong opposition from the rank and file of the ruling party.
So far as the IMF adviser's observation about the benefits of subsidised fuel prices and dismissal of the same by the Bangladesh energy adviser are concerned, there is, of course, some truth in both the claims. The most part of the fuel oils marketed by the state-owned petroleum companies constitutes diesel and kerosene. Diesels are used mainly in buses, trucks, power plants and farm equipment such as power tillers, irrigation pumps and deep-tube wells. The quantity of octane and petrol used by cars of the affluent people is not that big. On this count, the energy adviser is right that the reduced prices of diesel and kerosene are aimed at benefiting the poor. But in many cases the outcome does not necessarily go in line with this pious intention. The intermediaries have been depriving the poor farmers and others using diesel and kerosene oil of the benefits of their subsidised prices. There may be lots of debate over the actual gainers or losers of the ultimate rise or fall in prices of petroleum products, but the fact remains that the country's oil import bills have been rising in recent times.
In the fiscal 2005, higher prices of oil had cost an additional amount of $600 million. The oil price continues to be high in a volatile international market for a number of reasons, the rising tension between the West and Iran on the use of nuclear energy being the one. Under the circumstances, the state-run Bangladesh Petroleum Corporation, would continue to bleed, financially because of the mismatch between procurement and sale prices of fuel oils. However, for reasons of agriculture and the rising inflationary pressure on the economy, the decision to delay any further hike in the fuel oil prices seems to be a prudent one.

 

 
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