There are some nervous minds in the policy planning realms when it comes to what appears to be a 'no brainer' in cutting fuel prices. The Finance Minister has referred to a policy decision whereby prices would be kept within ten per cent of existing fuel prices in the international market. Low prices have meant much less pressure on foreign exchange (forex) reserves and cuts can only be fit the consumers who continue to pay very high prices. But the State Minister for Energy doesn't believe the time is right, even after Bangladesh Petroleum Corporation (BPC) has announced the subsidies have been covered and there are profits being made. His reluctance may have something to do with the outstandings from state-owned organisations such as Bangladesh Biman who are behind on their payments. That is an internal issue that cannot be squared off by the general public.
Bangladesh Bank is of the opinion that lower fuel prices will ultimately lead to lower remittances as development spending comes under the scanner especially in the Middle-East. With Kuwait finally joining other Middle-Eastern nations in announcing the end of subsidies in their own countries to reduce yawning budget deficits, the employment news does sound gloomy. January remittances are down 7.0 per cent over those of the previous year but whether all of it is due to oil price-led spending cuts is not certain.
The situation has given a different perspective to the environment debate as well. The previous focus on reducing fossil fuels such as oil,, gas and coal seems to have dimmed in view of the low prices, making it a harder decision for many countries. Whether carbon taxation is a way forwarded is already being discussed. The issue is global enforcement of such taxes won't be possible.
India has already declared it cannot prejudice its industrialisation and China has said something similar. As the two largest fuel consumers, it makes the problem more complicated.
Bangladesh has only recently got its head around what to do with its coal reserve. The prospects of further discovery of gas fields and even oil fields would mean the country taking a different stance on the energy issue.
Burdened by the high cost of power and with nuclear power many years away, the country needs to take a good close view of alternative energy resource that will fuel its industrialisation and the infrastructure that will be required by potential investors. If those investors are accountable to their governments as to the type of energy required, the government's policy of increasing the number of free economic zones may need the plans to be re-done.
(The writer may be reached at [email protected])