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Monday, September 26, 2011

Fuel Subsidy Debate

Mr. Rejaul Karim Byron from the Daily Star makes a report, where various subsidy statistics have reported for FY11 and FY12. Based on the data supplied by the Finance Ministry, the analysis claimed that, if fuel prices were not raised, then the government need the more than double the amount that it allocated while budget announcing. 

However, several issues need to be clarified here:

 ·         Subsidy increased due to higher international price is a misconception (or, partly true). Recent increase in subsidy is not wholly due to price increase at the international market, but also due to quantity increase in fuel import. As government decided to establish fuel-based power plant in the private sector, the fuel demand increased significantly and accordingly the subsidy given in this sector.
·         The domestic price of fuel includes the import tariff that the government imposes on fuel import. That means, a part of per unit fuel price goes to the government treasury as its revenue from people’s pocket. I wish the respective government authority provides the data of prices (international and domestic) without including the tariff on fuel import; then we decide the amount of fuel subsidy and argue whether the government is giving any subsidy in the sector. 

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