Cost of living crisis, transport chaos loom as steep fuel price rises take hold in Bangladesh

The government's decision to raise fuel prices by 23 percent in the face of a volatile global oil market is likely to set off a chain reaction with potentially far-reaching economic consequences in Bangladesh.

Obaidur Masumand Faysal Atikbdnews24.com
Published : 4 Nov 2021, 08:17 PM
Updated : 4 Nov 2021, 08:17 PM

Businesses are now having to reevaluate their operating costs and expenses as the transport sector braces for a turbulent period, with diesel prices going up by Tk 15 to Tk 80. The aftershocks could trickle down to consumer goods as well as ordinary households, which will need to re-adjust their spending priorities.

As people reacted sharply to the hike amid soaring prices of other essential commodities, transport workers fear many passengers will not agree to pay an increased fare during the coronavirus pandemic.

Transport owners and workers will begin an indefinite strike on Friday to protest the move. They have vowed not to return to work unless the fares are raised to cover the additional expense of fuel or the government reverses the hike, claiming they will not be able to sustain their business under the current fare system.

A rise in the cost of transporting goods will lead to an increase in prices of commodities, analysts warned. Power prices may go up as well since many plants use diesel as fuel. The main exporting industry, readymade garment, will also be affected.

The kerosene price hike will hit the families and shops that use the fuel for cooking.

Reacting to the power, energy and mineral resources ministry's announcement, Saidur Rahman Rintu, president of Barishal Chamber of Commerce, said he never saw such a big surge in fuel prices.

The government's decision will affect prices of every commodity and service, including food and transport, and make life harder for those with limited means, says Ghulam Rahman, president of Consumers Association of Bangladesh or CAB.

The CAB president on Thursday said the move was "illegal" because the ministry bypassed the Bangladesh Energy Regulatory Commission, which is supposed to take the decision after public hearings.

“It would have been justified had everyone be able to talk at BERC public hearings,” he said, adding that readjusting fuel prices on the basis of a volatile global market repeatedly is “illogical”. He suggested that the government should establish a fund to keep fuel prices stable in the domestic market.

“Bangladesh Petroleum Corporation earned tens of billions of takas by selling oil when the rate was low in the global market. They should be asked what they have done with that money.”

RISE IN FARES, COSTS

Bangladesh consumes five to seven million tonnes of diesel and kerosene annually for agriculture, industry, power generation, transport and household purposes, according to the BPC,

In fiscal 2019-20, the transport sector used 64 percent of the fuel, agriculture 18 percent, industries 7.65 percent, power 6.74 percent and households 2 percent.

An official of Bangladesh Power Development Board (BPDB), the sole buyer and seller of wholesale electricity at the government level, told bdnews24.com,

Diesel-based private power plants generate an average of 1200 to 1300 MW of electricity per day, according to an official Bangladesh Power Development Board (BPDB).

As a result of the spike in fuel prices, the PDB expenses are set to climb by an estimated Tk 7 billion. This is because if a private power plant's fuel costs increase, it will have a 'pass-through' effect under the original purchase agreement, meaning the additional cost will be passed on to the buyer.

Nurul Islam, vice president of Bangladesh Covered Van, Prime Mover and Goods Transport Owners Association, called for an emergency meeting on behalf of transport owners' groups to fix new fares to offset the additional cost of fuel.

On the Dhaka-Chattogram route, imported goods are transported for Tk 15,000 to Tk 20,000 and exported goods for Tk 10,000 to Tk 12,000.

The cost of fuel for the 400-km journey is set to increase by Tk 2,000. Thus, new fares have to be fixed by calculating the increased cost over other distances as well.

Swapan Mia, who operates a Balaka Paribahan bus, said he travels back and forth times along the Sayedabad-Gazipur route six times a day. The average daily consumption of diesel is 60 litres. With the price increasing by Tk15 per litre, he now has to spend more than Tk 900 per day on fuel.

In these circumstances, Swapan said there is no option but to increase the fares

“We currently charge Tk 60 for a trip from Gazipur Chowrasta to Sayedabad. We have to deposit Tk 3,000 daily with our owner. If we don't increase the fare, then it would be hard to make ends meet for drivers.”

Shahidullah Azim, a vice-president of Bangladesh Garment Manufacturers and Exporters Association, fears the sector may not be able to survive the rise in cost of transporting the products.

The exporters now pay Tk 12,000 for covered-van services that were available at Tk 8,000 some days ago, according to him. “We can’t imagine what the new rate will be after the diesel price hike.”

The cost of diesel-run power generators and boilers at the garment factories will also increase, he said.

Rintu, the Barishal business leader and a vice-president of the Launch Owners’ Association, said they will meet soon to fix new fares.

Launch owners believe the fuel price hike will lead to a Tk 100,000 rise in cost per trip from Dhaka to Barishal. More than 80 launches leave the capital’s Sadarghat terminal for the southern districts daily. Hundreds of lighter vessels transport goods throughout the country as well.

The fishing trawlers and other vessels in the coastal districts also use diesel. Nurul Qayum Khan, president of Bangladesh Marine Fisheries Association, said a 200-tonne vessel needs diesel worth Tk 6.7 million for a 22-day trip in the sea. It will need Tk 1.5 million worth of fuel for the same trip as the diesel price has increased.

According to the association, 262 vessels fish in the sea of Chattogram. The owners said they cannot profit much due to a syndicate of fish merchants that manipulates the market to keep the fish prices between Tk 60 and Tk 100 per kg.

“We often suffer losses. The situation after the diesel price rise will force many of us out of business,” said Nurul.

TRANSPORT CHAOS

Anwar Hossain, who drive bus on the route from Mymensingh’s Muktagachha to Dhaka, said he needs 80 litres of diesel per trip, which means he will need an additional Tk 1,200 for every trip.

“The passengers don’t want to pay the current fare. It will be difficult to collect the fare from them if new rates are implemented,” he said.

“Will anyone accept the new rates? No one wants to pay extra fare. There will be altercations all the time. Now it has become more difficult for us to drive bus.”

Ishtiak Hossain, who commutes from Mirpur to Banasree in Dhaka, said the fare was not changed on Thursday, but the conductor told the passengers that the owner will impose new rates on Friday.

Passenger Mohammad Asik said the bus operators had already raised the fares on Narayanganj-Dhaka route on Thursday.

Rakesh Ghosh, assistant general secretary of Bangladesh Bus-Truck Owners Association, said: “The diesel price hike will drive fares for passenger and goods transport on roads and in rivers. The entire transport sector will plunge into a chaos.”

‘WHERE WILL WE GET THE EXTRA MONEY?’

Abdur Razzak, a resident of Mirpur, said prices of everything will increase further amid the coronavirus crisis. “I need additional Tk 100 to buy one litre oil, one kg onion and one kg lentil. Now the prices will go up further on the excuse of diesel price hike. Where will we, the people with limited income, get the extra money?”

Ekhlasur Rahman, who commutes from Uttara to Dhaka, said he will have to spend at least Tk 500 more on transport every month from now. “People like me deposit Tk 500 in bank for monthly saving. Now we won’t be able to save anything.”

Salahuddin, a bus driver on Dhaka-Tangail route, said the number of passengers has decreased due to the coronavirus pandemic. “Even if the authorities raise fares, how will the passengers pay? People don’t have money now because their income has dropped.”

Toufique Imrose Khalidi
Editor-in-Chief and Publisher