The 165 million people of Bangladesh have long been habituated to dealing with price hikes - all the time, for all kinds of goods and services. With the state enjoying direct control over much of the distribution and supply networks, for any number of goods and services it is very often the government of the day that has to intervene in markets ranging from the seasonal, like the cattle markets that spring up for Eid ul Azha, to the cyclical market for its staple, rice.
They do this by directly setting price floors, ceilings, or even through policy interventions like pretend-bans on Indian cows (actually Delhi banned exporting them). But it's the same effect. The price goes up.
Mostly you have learned to accept them, this lack of gravity about them. But there was something about the announcement last Friday night (Aug. 5) - the notification came around 10pm - of serial increases in the price of fuel oils, or our liquid fuels - diesel/kerosene, petrol, and octane, that touched a nerve among the public in a way that we hadn't seen for years.
Of course it helped that these were literally the largest hikes on record. The notification from the Energy Division said in two hours from when it was sent, at the consumer level, the retail prices of diesel and kerosene will be Tk114 per litre, up by a whopping 42.5% from Tk 80/litre, the price set last November following a 23% hike from Tk 65/litre.
But the 42.5% hike even exceeds the 37.5% hike in price from 2007, when it went up from Tk 40 to Tk 55 - the largest hike on record prior to tonight.
Octane will cost Tk135 per litre, up an eye-watering 51.7% from Tk 89/litre - again the largest hike on record.
Lastly a litre of petrol will set consumers back by Tk130 from now at the pump, that used to be Tk 86/litre even just a few hours ago as of writing this report - another 51% hike in one go that has no precedent in independent Bangladesh.
The Bangladesh Petroleum Corporation (BPC) and Eastern Refinery Limited (ERL), it said, had gone for the adjustment in view of the prices of the same products in the international market being much higher in the international market compared to Bangladesh, the Energy Division's note said.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid, quoting from the notification, said "The government avoided increasing the prices of fuel oils for as long as it could. Now some adjustments have to be made taking stock of the current global situation."
Of course it made much of the war in Ukraine. Just ran with it, blind. They did this from the start of course, so it was not unexpected.
Hamid offered some hope that the prices may be adjusted back down if the situation in the international energy markets shifts to allow that. But this rarely, if ever, happens. He harked back to the one occasion it happened under him back in 2016, by very small amounts. It was when prices hit rock bottom internationally in the midst of a prolonged slump in prices that only turned around with the most recent rally in energy markets.
"In April 2016, the government reduced the prices of fuel oils. If the situation normalises, the prices of fuel oils will be revised accordingly," he said.
Hamid said due to the upward trend in oil prices in the global market (which was actually over by then), many countries have been regularly making adjustments to prices. That's his new favourite word by the way - 'adjustment'.
Without quite saying so in the note, it would seem the government has chosen to gain parity with prices in the neighbouring Indian state of West Bengal, by conveying the following:
West Bengal government in India set the price of diesel at Rs92.76 per litre and petrol at Rs106.03 per litre in Kolkata on May 22, 2022 - these prices remain in effect today, and work out to Tk114.09 (diesel) and Tk130.42 (petrol), at an exchange rate of Rs1 =Tk1.23.
They tried to reason with you in the note - but then they tried to reason too hard, veering into the strange theory of cheaper fuels in Bangladesh being smuggled to India. The Earki poster said it best (reproduced here). Even the BGB was forced to refute it by releasing a statement. Some Indian trucks travelling through here may stop to refuel. That is not smuggling.
Finally, it said the BPC is already running a loss of Tk8,014.51 crore in petroleum fuel sales in the last six months, from February to July. Considering the global oil market situation, making "rational price adjustments" became essential to continue BPC as a going concern, while tasked with the vital function of overseeing petroleum imports, among other things.
It sounded almost indignant by the end there. But that was hardly winning any sympathy from the public, given the mood they were in.
Centre for Policy Dialogue, the influential think-tank, later in the week said BPC could have used the Tk 46,858 crore profit it made since 2015 in oil purchases to continue the subsidy on fuel and thus prevent the price hike.
The BPC could also have offset the losses it has been incurring over the last six months, said CPD, asking the government to disclose what happened to the BPC's profits.
"It was earlier said that the profits were spent on or invested in various development works but we found it to be a delusional claim," said CPD Research Director Khondaker Golam Moazzem at a media briefing and discussion titled, "Record Fuel Price Hike in Bangladesh: Could It Be Avoided?"
The BPC earned at least Tk 46,000 crore, according to the government, since 2015 and spent only Tk 9,214 crore on 11 self-funded development projects, he said.
CPD Executive Director Fahmida Khatun said the government could have avoided the unprecedented hike in the fuel prices by checking corruption, theft and mismanagement at the BPC.
She said the government gets up to 34 percent in taxes -- in the name of customs duty, VAT and advance income tax -- from the BPC. The burden of the duties and taxes levied upon the BPC is passed onto the consumers.
"The government earned Tk 8,540 crore in duty and taxes from the BPC in the last fiscal year and is expecting to get tax revenue worth Tk 9,251 crore this year. If it had reduced these taxes, it could have avoided the price hike."
In her keynote, Fahmida said that in addition to the revenue from VAT and other taxes, the government realised Tk 10,000 crore from the BPC in FY20 and FY21. The money was a surplus held by the BPC.
"If the government wanted to keep the fuel prices unchanged, it could have either slashed the taxes or used the profits as a subsidy. But they passed the burden onto the consumers, by impacting transportation cost, agricultural, industrial and electricity production cost...," she added.
Terming the subsidies an inefficient economic tool, she said, "It was, however, supposed to be withdrawn but in phases."
Fahmida compared the new fuel prices with those in Nepal, Pakistan, India, Bhutan, Vietnam, Sri Lanka, Thailand, the Maldives, Hong Kong, Germany, the US and Singapore. She made the keynote presentation that framed the issue by posing it as a question: "Could the unprecedented price hike have been avoided now?"
The 'now' is very important. The public feel completely left out of the process of reaching a decision that affects their lives profoundly. And while one is aware of the logic to withholding these announcements till late on the day, being brought in at 2 hours' notice- well actually, maybe the greater concern for us on the whole should be the disruptive effect of a sudden price hike in people's lives; not the opportunities for profiteering that open up, when you give advance notice.
And the answer to the CPD's question could only be a resounding yes.
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