CPD for reinstating previous fuel price

In view of recovery from the adverse impacts of the pandemic, stability of fuel price is critically important as it is a ‘strategic’ commodity in nature. In this connection, Centre for Policy Dialogue (CPD) has recommended reinstating the previous prices of diesel and kerosene on an immediate basis.

Another organization, South Asian Network on Economic Modeling (Sanem) said that the fuel price hike would hamper the ongoing business recovery of the country. 

The think-tank made the recommendation at a press briefing titled “Fuel Price Hike: How Necessary Was It?” on Wednesday morning in Dhaka.

CPD executive director Dr Fahmaida Khatun moderated the press briefing and presented the keynote.

On last Wednesday, Bangladesh Petroleum Corporation (BPC) raised the prices of diesel and kerosene at the retail level by 23 per cent -- to Tk 80 per litre from Tk 65 per litre. The new price became effective on Thursday (November 4, 2021).

The price of furnace oil has also been raised to Tk 62 per litre from Tk 59 per litre.

“The price hikes of diesel and kerosene came at a time when prices for daily necessities were already exhibiting an upward trend,” said the keynote paper, presented at the briefing, of the CPD.

Mentioning that Bangladeshi Taka has depreciated against US Dollar by 1.10 per cent between November 2020 and November 2021, the think-tank added that the depreciation indicated costlier imports and, in turn, leads to higher cost of living.

Finally, “Covid-19 has given considerable rise to poverty in Bangladesh,” CPD added further.

CPD mentioned that amid the surging global energy prices, this decision to increase domestic fuel oil prices came to recover the apparent losses incurred by the state-owned BPC.

It is claimed that BPC was losing Tk 200 million per day before the price adjustment as it was selling diesel and furnace oil lower than the prices which would keep them in break-even.

CPD, quoting the finance ministry statistics, mentioned that during the FY15-FY21 period, BPC amassed a profit of nearly Tk. 431.38 billion and also anticipated a profit of Tk 19.10 billion during FY22.

“The accumulated profits of BPC should be enough to provide some cushion despite the previously accrued losses,” argued CPD.

“The government can keep the prices at their previous levels through subsidies or tax and tariff cuts,” the think-tank further argued.

Forecasts by multilateral agencies like World Bank predict a downward movement of fuel prices in 2022.

“Absorbing the price shock and focusing on recovery should be the government’s prime concern at this point in time,” observed CPD.

The think-tank also argued that the government should ensure the enforcement of its measures so that the common people do not fall prey to the whims of bus, launch or transport owners.

It also underscored the improvement of BPC’s accountability and transparency. “Corruption of fuel marketing companies should be stopped,” it added.

CPD also stressed making consultation with all stakeholders as a part of the price-setting mechanism ‘instead of arbitrary price’ setting practice.

Professor Mustafizur Rahman, Distinguished Fellow; Dr Khondaker Golam Moazzem, Research Director, CPD; Mr Towfiqul Islam Khan, Senior Research Fellow, CPD and Mr Muntaseer Kamal, Senior Research Associate, CPD were also present at the briefing and responded to questions from the journalists.

Meanwhile, The fuel price hike will hamper the ongoing business recovery of the country from the loss of Covid-19, according to South Asian Network on Economic Modeling (Sanem).

Dr Selim Raihan, professor of Economics department at University of Dhaka and executive director of Sanem, made the comment on Wednesday after revealing the results of the 6th level survey to verify the confidence of business entities in overcoming Covid-19.

"We have seen in the survey that all kinds of businesses, big and small, are on the way to recover from the loss of Covid-19," he said.

Almost all the manufacturing industries are in growth as compared to the same period of the previous year. However, the recent rise in inflation, falling remittance inflow and rising fuel prices will impede this growth, said the Sanem executive director.

He said the increase in transportation and production costs along with the price of commodities in the market would put industry and consumers at risk. People will reduce costs and recovery will be hampered.

According to the results of the survey, as of September 30, a total of 21pc of the institutions are in strong recovery from Covid-19 pandemic. Besides, 52pc of the institutions are in moderate recovery while 27pc are still in weak recovery.

Three months ago, in the 5th phase of the survey, Sanem said that only 9 percent of the institutions had reached a strong recovery till July. At that time, 64 percent were in weak recovery.

Sanem conducted the survey in October on the basis of interviews with entrepreneurs or their representatives from 502 industrial and service organisations.

"Those who have received the government's stimulus package are in a better position to turn around financially," he said.

Small entrepreneurs lag far behind compared to medium and large scale entrepreneurs. Entrepreneurs also complained of bribery to get this incentive package.