Formulation of a fuel price policy with transparent implementation demanded by experts

Dhaka August 10 2022:

Experts pointed out that the recent fuel price hike in Bangladesh has affected socio-economically mainly grass root people specifically poor and mid income group people.

They highlighted immediate price hike was noticed and impacting life standard of the mass people except high income group people.

They lamented transportation, consumer market, cost of over all living were raised unusually high due to fuel price hike by the government.  

All the production and service sector including agricultural production and export oriented production factories as well local producers are experiencing impact of inflation pressure in Bangladesh.

Due to not rising income of mass people they are now squeezing everyday consumption and may migrate from urban area to rural residences if they cannot manage to adjust with such price hike.

Experts are expecting social imbalance and unrest due to inability to adjust with high inflation and cost of living.

Those projections were made at a media briefing titled ‘Could Unprecedented Fuel Price Hike be Avoided Now?’ on Wednesday organized by Centre for Policy Dialogue (CPD) at its city office at immediate response of recent fuel price hike made by the government.  

Dr Fahmida Khatun, Executive Director, CPD made the key note presentation and moderated the session.

Dr Ijaz Hossain, Former Professor, Bangladesh University of Engineering and Technology (BUET); Mohammad Hatem, Executive President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA); Anwar Faruque, Former Secretary, Ministry of Agriculture;  Mozammel Hoque Chowdhury, Secretary General, Bangladesh Jatri Kalyan Samity; and Dr Khondaker Golam Moazzem, Research Director, CPD were Distinguished Panelists during the media briefing.

In the key note presentation, Dr Fahmida Khatun came up with the recent socio-economic scenario after fuel price hike and suggested following measures:         

Immediate measures :

Given the fuel price hike is likely to stoke the already difficult inflationary situation, the government must provide immediate support to the poor and limited-income households across the country.

The number and quantity of items should be increased under the open market sales (OMS) programme.

Ration cards should be made available for a larger number of people.

For better targeting of the population for these supports, institutional mechanisms should be strengthened and highest transparency should be ensured.

Since cost of doing business is expected to shoot up, it will become difficult for micro and small businesses to stay afloat. The government should consider providing stimulus to such businesses.

The leanings during the implementation of COVID-19 targeted stimulus packages ought to inform this process. That is, bottlenecks in accessing such support should be removed.

Fuel prices are administered by the government of Bangladesh. It has been observed in recent years, fuel price adjustment in Bangladesh happens in a somewhat arbitrary manner.

While the burden of higher prices in the global market has been frequently passed on to the consumers, the same did not happen in case of benefits of low prices.

Formulation of a fuel price policy and its application in a transparent manner has become an exigency.

Taking the current inflationary trends into cognisance, the government can consider reducing fuel prices through tax or tariff cuts for a short period.

 The government may consider revising the fuel prices for now and opt for a gradual increase after consulting with relevant stakeholders and Bangladesh Energy Regulatory Commission (BERC).

Stakeholder consultation should be part of the price setting mechanism instead of arbitrary price setting practice.

According the economist, medium term measures should be :

The power and energy sector in Bangladesh needs to change its policy focus on primary energy which is currently importing dependent.

The government should invest in primary fuel in the country and diversify the sources.

New gas exploration initiatives and efficient management of the sector are of paramount importance in this regard.

Bangladesh should also invest in renewable sources for both generating energy and fulfill its climate commitments q BPC should be made an efficient organisation through improved governance, management and accountability.

Finally, this record high fuel price in one go could have been avoided if the government had fiscal space. Unfortunately, the government has not done much for institutional reforms which could improve better resource mobilisation and reduce wastage and corruption.

On 5 August 2022, the Ministry of Power, Energy and Mineral Resources announced a record hike of petroleum prices at the retail level was effective from zero hours on 6 August 2022.

The sudden and record high fuel price will have a negative impact on numerous sectors of the economy and hurt the common people.

This had an immediate effect on the transportation, industry, agriculture, and power sectors, which accelerating further inflationary pressure. The prices of diesel and kerosene have been increased to Tk. 114/litre from Tk. 80/litre – indicating a whopping 42.5% rise.

The price of octane has been raised by 51.7% – from Tk. 89/litre to Tk. 135/litre .

Similarly, the price of petrol has been increased to Tk. 130/litre from Tk. 86/litre – exhibiting a 51.2% growth.

Such sharp increase in fuel prices is unprecedented.

It must also be noted that the prices of diesel and kerosene were increased by 23.1% on November 2021.

This increase comes at a time when the country is already facing considerable challenges originating from both domestic and external fronts.

Different industry insiders, economists, experts and media took part, among others, in the media briefing.

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