C T Online Desk: The price hike of fuel oils by almost 50 per cent will multiply people’s miseries, hurt fresh investment and employment because of the cumulative effects of the exorbitant prices on the transportation costs and the industrial and agricultural outputs.
Economists told New Age on Saturday that the record upward adjustment of the fuel oil prices would cause a sharp increase in transportation costs, triggering a domino effect on living, business and job generation when the country’s economy is still recovering from the impact of the over-two-year-long Covid pandemic.
They also noted that the government was acting on advice from the International Monetary Fund to obtain loans from it for overcoming the dollar crisis aggravated mostly by the price hike of fuel oils and fertilisers on the global market and rampant capital flight through over-invoicing by local banking channels.
Dhaka University economics department chair Professor Mahbubul Mokaddem Akash termed as suicidal the government decision to hike fuel oil prices, possibly under IMF instructions and bypassing the Bangladesh Energy Regulatory Commission.
Fuel oils are crucial public goods, the prices of which should be determined by a regulatory commission, he observed.
The country’s annual import of fuel oils is about 65 lakh tonnes, of which diesel accounts for over 80 per cent.
The transport sector consumes over 62 per cent of the diesel import and the use of the fuel in agriculture is some 20 per cent, according to the Energy Scenario 2020–21 published by the Hydrocarbon Unit of the power and energy ministry.
Both transport and agriculture sectors will bear the major brunt, said former caretaker government adviser Mirza Azizul Islam.
Almost all sectors, including the export-oriented readymade garment industry, will be adversely impacted under the cumulative impact of the fuel oil price hike, noted the economists.
They said that multilateral lending agencies had been asking the government to reduce the amount of subsidies and transfer the fund to education and health sectors.
Over Tk 50,000 crore was spent on subsidy in the financial year 2021–22, most of which went for power generation, import of liquefied natural gas and fertiliser.
In the past seven years, the government did not provide any subsidy for the import of fuel oils under the state-owned Bangladesh Petroleum Corporation that made a staggering profit of Tk 48,122 crore until May 2022 from the financial year of 2014–15.
The rationale cited by the government for the latest price hike of fuel oils is unjustified, said Center for Policy Dialogue distinguished fellow Debapriya Bhattacharya.
He also sees a serious lack of coordination among the government agencies in policymaking.
The latest price hike of fuel oils came within a week after the price hike of fertiliers on the local market and amid a downward trend of fuel oil prices on the global market.
Agriculture experts have already called the decision of hiking the urea price untimely as it will discourage farmers to grow rice, the price of which has been seeing an upward trend for the past six months due to a ‘perceived’ supply shortage.
Former World Bank Dhaka Office lead economist Zahid Hussain said that the government decision for price hike of fertilisers and fuel oils might please multilateral lending agencies but the decisions would hamper economic activities across the board.
Private investors will feel shy of making fresh investment that will hurt job generation after the prolonged Covid pandemic substantially slowed down the economic growth in the past two financial years, he said.
The country’s economic growth fell to 3.4 per cent in FY20 and 5.47 per cent in FY21 from 8 per cent in FY19 amid the pandemic that aggravated the poverty situation by creating 3.4 crore new poor.
According to a joint survey by the Power and Participation Research Centre and the BRAC Institute of Governance and Development in November 2021, the poor incurred an 80 per cent drop in income during the worst-ever pandemic.
Another survey by the Bangladesh Bureau of Statistics in October 2020 found that the country’s unemployment rate went up to 22.39 per cent between April and August from 2.3 per cent in March of 2020 due to the Covid outbreak.
Economists noted that the latest fuel price shock would be difficult to absorb for the poor and the low- and middle-income people, who are already going through the high inflation woes for some six months,
The BBS recorded the monthly inflation rate at 6.17 per cent in February 2022, a 16-month high rate since October 2020, when the figure was 6.44 per cent.
The point-to-point inflation was 7.48 per cent in July after it hit 7.56 per cent in June, highest in nine years.
Inflation will now hit double digit, said Policy Research Institute executive director Ahsan H Mansur.
A double-digit inflation in 2008–09 sparked a severe protest against the military-backed caretaker government.
