Dhaka, Aug 6 (EFE).- Bangladesh hiked fuel prices by about 50 percent on Saturday, raising concerns about price inflation in the midst of an economic downturn.
The power, energy, and mineral resources ministry on late Friday raised the prices of diesel and kerosene by 42.5 percent to taka 114 per liter ($1.20) from taka 80.
The price of petrol was raised by 51.16 percent to taka 130 a litre from taka 86 and the price of another petroleum product, octane, was raised by 51.68 percent.
A ministry statement said the decision to raise fuel prices was to combat fuel smuggling and reduce losses at the Bangladesh Petroleum Corporation, the government’s sole oil importing agency.
It said neighbouring India in May set the price of a liter of diesel at Rs.92.76 and petrol at Rs.106.03, which is equivalent to Bangladeshi taka 114.09 and 130.42, respectively.
“Due to low prices in Bangladesh, there remains a chance of fuel oil smuggling (to India),” the statement said.
It added that Bangladesh Petroleum Corporation counted taka 8,01.4 billion in losses between Feb.22 and July 31.
Hundreds of people stood in long queues at fuel stations in Dhaka as soon as the government announced its decision, creating chaos.
Local television stations reported people joining skirmishes in petrol stations for fuel before the clock ticked 12 when the new prices came into effect.
Economists said the big rise in oil prices would hit the country’s transport and agricultural sectors.
“Transport costs will rise, affecting the common people. As a result, I am concerned about rising inflation,” said Khondaker Golam Moazzem, research director at the independent think-tank Centre for Policy Dialogue.
Bangladesh’s inflation remained consistently high in the past few months.
It was 7.48 percent in July, only slightly down from the nine-year record high inflation of 7.56 percent in June.
Moazzem suggested the price hike of fuel oil be related to Bangladesh’s recent appeal for loans from multi-national lenders, who more often oppose government subsidies in the power and energy sectors.
The Bangladesh government in July requested the International Monetary Fund for a loan for the first time in a decade as the country was forced to impose measures to limit the use of fuel amid high inflation.
Though the government did not reveal the amount of the loan, media reported that Bangladesh sought $4.5 billion from the global lender to ease pressure on the country’s balance of payment amid depleting foreign exchange reserves.
“The fuel oil price hike could be related to the government seeking loans from donor agencies and discussion about reducing subsidy,” said Moazzem. “We think adjustment of subsidy is needed. But it should have been done through structural reforms instead of raising prices,” he said. EFE