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Monday, September 19, 2011

Rise in fuel prices

The government has raised fuel prices by Tk5.0 per litre for diesel (from Tk46.0 before), kerosene (from Tk46.0 before), petrol (from Tk76.0 before) and octane (from Tk79.0 before) and Tk 8.0 per litre for furnace oil (from Tk42.0 before) with effect from 19 September, just four months after the previous hike on 6 May 2011.

Why the government had to take such a decision despite a persistently higher inflation in the country?

Government's explanation: (i) to reduce the losses (or, reduce the subsidies of the government in this sector) of Bangladesh Petroleum Corporation (BPC), which was due to the rising demand for petroleum products, especially by new diesel and furnace oil-fired rental and quick rental power plants.; (ii) to help check the smuggling of petroleum products to the neighbouring India and Myanmar.

Other plausible (and possibly, that's the main reason) explanation:  To fulfill the conditionalities of IMF to receive US$1.0 billion programme loan from this multilateral organization. 

Impact: Obviously, it will push up prices of food and transportation cost, although the government plans to give cash subsidy for diesel to be used for pumping water to the farmland. Even this subsidy measure of the government can't stop the direct adverse effect of higher fuel prices on commodity prices.

Here is a news link from the Financial Express.

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