Electricity and gas are expected to become more expensive after diesel, kerosene and liquefied petroleum gas as the government seeks to calibrate prices in the local market after a spiral in global prices since July.
Last month, senior officials from different ministries, including finance, energy and power, met to analyze the impact of the global price escalation on the budget.
âThe increase in oil prices will have a huge negative impact on the prices of raw materials due to the increase in transportation and production costs. time around. ”
Ghulam Rahman, President of the Bangladesh Consumers Association
At those meetings, there was talk of raising electricity and gas prices, as keeping them at current levels would result in huge subsidies, which the government might not be able to afford, the government learned. Daily Star from people familiar with the procedure.
For example, a subsidy of Tk 6,000 crore was awarded for the import of liquefied natural gas during this fiscal year. But according to the initial estimate, a subsidy of Tk 20,000 crore to Tk 25,000 crore might be needed to keep the gas price at the current level, they said.
Energy and Mineral Resources Division secretary Anisur Rahman acknowledged the development. But no decision has been made in this regard, he told the Daily Star.
Previously, it cost Tk 250 crore to bring in a cargo of LNG, which is blended with locally produced natural gas before distribution. Now 1250 crore of Tk is needed.
âManaging such huge sums of additional funds is now a big concern,â he said, adding that the ministry had written to the finance division to seek funds for a shipment of LNG which was due to arrive next month. .
The import cost of LNG is now 56 Tk per cubic meter, so the average cost per cubic meter of gas has dropped from 12 Tk to 23 Tk previously.
“The rise in prices will create a spiral effect. There will be a negative effect on industries, businesses, farmers and consumers. The queue behind the WHO trucks will lengthen. The standard of living will deteriorate. ”
Golam Moazzem Research Director of the Center for Policy Dialogue
The government may need to pay around Tk 20,000 crore as an electricity subsidy if the price is not adjusted, Rahman said.
“We must remember that the government provides free Covid-19 vaccines. If the price of fuel is not increased, it would have a negative impact on the budget,” a finance ministry official said on condition of anonymity .
Economists have criticized the government’s move, which comes at a time when Bangladesh is emerging from the throes of the pandemic.
âMany sectors are still struggling and we don’t yet know for sure that there won’t be another wave of Covid-19,â said Selim Raihan, executive director of the South Asian Network on Economic Modeling.
Rising electricity and gas tariffs as well as diesel and kerosene prices would further increase production costs and fuel inflation.
But the finance ministry official, citing an internal macroeconomic study, said the impact of rising fuel prices on food and non-food inflation could only last for three months.
Raihan maintains, however, that the government could have postponed the decision for several months.
“Our recovery process would be hurt from within, at a time when government support is absolutely needed,” he said.
The government presented the losses that the state-run Bangladesh Petroleum Corporation would rack up as justification for raising diesel and kerosene prices by 23% – and piling up the suffering of the poor and middle classes, still reeling from the shock. the blow of the pandemic.
In the five and a half months leading up to October, the government agency suffered losses of Tk 1,147.60 crore for soaring crude oil prices on the international market, according to the Energy and Mineral Resources division.
The reverse, however, was not valid for BPC.
When the price of diesel was low in the global market, multilateral lenders like the World Bank and the International Monetary Fund and local think tanks like the Center for Policy Dialogue called on the government to reduce the price of fuel accordingly.
But the government resisted.
Between fiscal years 2014-15 and 2020-21, the state-owned company recorded profits of Tk 43,136 crore.
When asked about the matter, the Energy Secretary said the government cut the price of diesel by 3 Tk per liter in April 2016, but by then transport owners had not lowered prices. prices.
âWe will surely reduce the price of diesel if the price drops in the world market in the next few months,â Rahman said.
Nasrul Hamid, Minister of State for Electricity, Energy and Mineral Resources, echoed yesterday.
When asked if the government would consider lowering tariffs on fuel imports like in India instead of increasing the prices, Hamid said the National Board of Revenue could make such a decision and not his ministry. .
The government could have viewed the loss of not raising diesel and kerosene prices as a form of stimulus, Raihan said.
Since many failed to secure previous stimulus packages, the benefits of this cycle would have reached all.
“My hunch is that the government will reverse its decision,” Raihan said, adding that the Energy Ministry’s decision on Wednesday was taken in a rush.