The hike in fuel oil prices that came into effect from Friday last, is considered rational and, thus, unavoidable by the government under the prevailing circumstances. But this will surely irritate the common man. The poor who are dependent on kerosene oil to light their homes after dusk would have to count now additional costs more on that account. And the cost of living would surely go yet another notch up because of reflection of higher transportation and production costs in the market prices of all commodities, industrial and agricultural, and rates of related services. The fuel price-hike would hit the farmers most who are already seriously affected by the mismatch between the cost of production and the market prices of rice. If the government can not ensure the availability of diesel at subsidised rate for the farmers, the production of boro rice this year is likely to suffer.
The Bangladesh Energy Regulatory Commission (BERC) has completed its preparations for yet another hike in power tariff. The upward adjustment of fuel prices has made the job for the BERC rather easy and the power subscribers should now expect a hike in power tariff any moment. The cumulative effect of the increase in fuel prices and power tariff could well be reflected in both food and non-food inflation, the latter being more susceptible to hikes in fuel prices and power tariff. But the problem in the case of this country has been that the impact on the cost of living has always been well above, what, on objective economic and social grounds, can be termed, a rational level. This has been hurting the poor and fixed income people most.
There is no denying that the government needs to trim its ever-bulging subsidy expenditure, the major part of which is meant for fuel oils. The International Monetary Fund (IMF) in fact has done no wrong by asking the government to bring down that subsidy on account of fuel oils to avoid fiscal distortions, though many tend to construe or misconstrue, depending upon how one looks at it, the IMF's advice as an arm-twisting. But the financial health of the Bangladesh Petroleum Corporation (BPC) has become quite nerve-wreaking for both the government and management of the corporation which is responsible for marketing of petroleum products. In fact, the task of arranging funds for the cash-strapped BPC from state-owned banks or through issuance of bonds on the part of the Ministry of Finance (MoF) for years after years has been rather annoying.
The MoF would have possibly been too happy to rid itself of the burden of subsidy as far as possible. This is quite logical, considering the limited cushions that it has for absorbing a bulging subsidy bill that entails a huge drag on the government's budgetary resources in a country where tax: gross domestic product (DGP) ratio is very low. Yet then, the total elimination of subsidy is difficult, given the country's socio-economic conditions. For the consumers, it is not unnatural to react negatively to the price-increase of any commodity; fuel oils are no exception. But the intensity of response varies, depending on timing and context. Many people tend to believe that the government could have easily avoided the latest hike in the prices of petroleum products, had there been no liquid fuel oil-based rental power plants. The latter, as the public perception goes about them, are only helping a select group of entrepreneurs to accumulate wealth by foul means at the cost of the state coffer. Furthermore, the claim about the price-hike of petroleum products as being needed for making a partial adjustment with the rise in their international prices, is not tenable. This is so because the international oil market has not been subject to any notable volatility in recent months.