Tuesday, 7 December, 2021
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Fuel price hike a fresh blow to Covid-hit economy: Experts

Fuel price hike a fresh blow to Covid-hit economy: Experts

The price hike of fuel oils is going to hit the country’s four major sectors in addition to casting a negative impact on the living cost as the prices of essentials are already in an unchartered territory, experts said.

They said the announcement of the price hike of diesel and kerosene has sparked off tensions in four sectors -- power, transport, agriculture and industry -- as diesel is the main fuel especially in transport, agriculture and industries, while power sector largely depends on it.

Mustafizur Rahman, a Distinguished Fellow at the Center for Policy Dialogue (CPD), Mohammad Ali Khokon, President of Bangladesh Textile Mills Association (BTMA) and Energy experts and professor of Bangladesh University of Engineering and Technology (BUET) Dr Ijaz Hossain came up with the apprehension while talking to journaists.

They said agriculture, transport, industry and power are four big sectors of the country and the sectors are still trying to recover from the depths of the pandemic fallouts. It is a fresh blow to the economy, they said.
According to official sources, the country consumes 60-65 lakh tons of fuel oil every year and 40-45 lakh tons that is diesel.

As per the new announcement, the prices of diesel and kerosene have been raised by Tk 15 per litre to Tk 80. The energy sector has already been reeling under a gas crisis and the sudden rise in diesel and kerosene prices will aggravate the situation.

The economists also believe that the rise in diesel and kerosene prices is also going to increase the overall cost of living in the country, adding to the woes of the poor people and also the middle class.

According to them, the continuation of this price increase will destabilize the food and service sectors, especially the sectors where the use of such fuel products is high. The common people will suffer most as it is going to have a big impact on other sectors besides transport.

CPD Special Fellow Prof Mustafizur Rahman said the rise in diesel-kerosene prices would affect all the sectors, including transport, agriculture and electricity. The economy is under the pressure of inflation and the rise in fuel oil prices will have a negative impact on all levels, starting from the consumer to the producer, he feared.

Mustafizur Rahman, however, said if the price is not increased it is again putting pressure on the government as it has to provide subsidies.

He said the kerosene price could be brought down since it is used by low-income people.

Prof Mustafiz suggested allowing the private sector to import diesel which will help create a competition in the market to reduce the price as well as break the monopoly of Bangladesh Petroleum Corporation (BPC). The price could be reduced a bit, especially if a long-term agreement is reached, there is an opportunity to import fuel oil at a lower rate.

According to energy experts, at least 35 lakh tons of fuel oil is used every year on roads, railways and ships in the country. Of this, 25.74 lakh tons of diesel is used. Diesel accounts for 72.79 per cent of the fuel used in the transports.

Agriculture mostly depends on diesel for fuel oil as it accounts for 99.73 percent of the total fuel oil used in this sector. The rising fuel prices will further increase farmers' irrigation costs, according to sector insiders.

If the cost of irrigation increases further, the farmers will not be able to raise the production costs, they said.
The number of diesel-powered irrigators used in the agricultural sector in the country is about 16 lakh. Huge diesel is used every year as fuel to operate deep-shallow tube-wells, LLPs, power tillers and tractors.

In the 2020-21 financial year, the demand for fuel oil for agricultural machinery was estimated at 19.39 lakh tons by the BPC. The annual consumption of fuel oil in the industrial sector was 4.21 lakh tons. Of this, diesel was 3.41 tons or 80.98 per cent.

Entrepreneurs in the sector say that if electricity is generated from diesel, the cost of production in factories will increase. As such, the rise in the price of fuel oil is going to have a big impact on this sector as well.
In this regard, Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon told journalists correspondent that the price of fuel oil has gone up in the world market.  

“Those of us who run factories with diesel-powered generators will have higher production costs,” he said.
Prof Ijaz said the diesel price hike by Tk 15 per litre will affect the economy as a whole. The government could have increased the diesel price step by step, he said, adding that the transport sector has already been affected and it will also help raise the prices of essential commodities. “Such price hike gives an indication of raising power tariff,” he added.