The record hike in fuel oil prices, made effective from Friday midnight, has come as a severe jolt. Earlier on the same day, the state minister for power, energy and mineral resources hinted at raising the fuel oils, power and gas prices. But none expected the prices to be set at such high levels. Most people are worried about the fallout. Even laypeople understand the implications of such an enormous increase in fuel prices on the overall price situation. Already hard-pressed by the soaring cost of most essentials, the people are now bracing for yet another bout of price increases.
The government had raised the prices of diesel and kerosene in November last and spared other petroleum products. This time, only furnace oil, used in bulk for power generation, could escape the net. The government should know that the latest hike in fuel prices would not go well with the people. But the ground realities must have compelled it to go for such an unpopular move. The volatile international fuel oil market is one reason. The Bangladesh Petroleum Corporation (BPC), reportedly, has been counting huge losses in recent months because of the large gap between the cost of procurement of petroleum products and their selling prices.
Unofficial sources, however, point to the government's recent approach to the International Monetary Fund (IMF) for $4.5 billion in financial support behind the latest hike in fuel oils and fertilizer prices. The IMF reportedly has asked the government to execute several measures to be eligible for receiving the help. One measure is the reduction of subsidies on fuel oils. The government, it seems, is left with no option other than swallowing the 'bitter' pill, which, however, would help narrow the budget deficit in a difficult time.
Yet the negative impact of the hike in fuel oil prices by such a big margin on industrial and agricultural production will be enormous. The hike in power rates, seemingly, is also not far away. Because of the higher cost of production, the export sector will lose its competitive edge. The country now needs more than ever higher export receipts to help compensate for the soaring cost of imports. Equally important is the cost of production in the agricultural sector. The price of urea fertilizer has already been enhanced. The latest diesel price will only add to the woes of the farmers who are busy transplanting Aman seedlings. Rice is now costlier than ever. Even import of the main staple at reduced duty has left no impact on the market. The higher cost of production will inevitably lead to a further rise in cereal prices.
Last but not the least, the transport sector will encounter big problems due to hike in fares, an obvious outcome of the increase in diesel price. This time, the transport owners would demand a hike that was never seen before. If that happens, commuters will be in a soup. The government will have to show a very high level of efficiency in handling the situation that is likely to emerge following the increase in fuel prices.