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Dismisses IMF claim on subsidy benefit
Govt rules out fuel price hike
Doulot Akter Mala
3/11/2006
The government has ruled out the possibility of increasing the petroleum fuel prices in line with that of the international market.
Energy and Mineral Resources Division Adviser Mahmudur Rahman strongly opposed an International Monetary Fund (IMF) suggestion to increase gasoline prices, while talking to the FE Friday.
IMF Adviser in the Asia Pacific region Thomas Rumbaugh, who lead an IMF mission to Dhaka last week, advised the government for further adjustment of fuel prices.
Rumbaugh told the newsmen Thursday that the domestic prices of petroleum products had been kept significantly below the international levels at a huge cost to the economy.
The energy adviser said the government is not considering hike in the gasoline prices, as irrigation will be affected by it.
The people at the grassroots are the prime consumers of diesel and kerosene and irrigation will be badly affected by further hike in the prices of diesel, he added.
"Prevailing political and social conditions are also not favourable for any further hike in the petroleum prices. There is no scope to increase the gasoline prices further", he said.
Rumbaugh derided the present petroleum pricing policy, saying it "entails considerable and growing economic costs, mainly benefits higher-income consumers and only delays the inevitable adjustment".
"… the majority of the benefits from the fuel subsidy accrue to better off households rather than to the poor," he said.
On this score, he advocated an appropriate pricing policy that "would have room to provide more services to low-income groups".
Mahmudur Rahman said subsidy is badly required in the case of diesel and kerosene and consumers are getting the products at affordable prices.
The government is giving fuel subsidies to help the poorest section of people in the country, he added.
He said all sections of the people will be affected by the withdrawal of the fuel subsidy as per IMF suggestions.
He said the government will continue the subsidy to help the poorest section of the population.
The energy adviser said if the government increases the gasoline prices, the transportation cost will rise, which, in turn, would push up the prices of essentials further.
The IMF adviser has pointed out that delay in fuel price adjustments has resulted in continued losses of the state-run agencies of the energy sector.
In 1999-2000 fiscal, petroleum import bill was $638 million or 7.8 per cent of the total import bill, but in 2004-2005 fiscal, it stood at $1,602 million or 12.2 per cent of the total imports, according to an analysis of local thinktank -- Centre for Policy Dialogue (CPD).
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