There are ways to lessen the burden of fuel price hike. Countries show how
Any hike in fuel prices would definitely impact almost all goods and services as expensive fuels add to the cost of production and transportation of everything. That is why countries, when hiking energy prices become inevitable, try various innovative measures to lessen the burden on people. These are now more evident as the worst inflation in decades is hurting consumers all over the world.
To give its people some relief, the German government has launched a scheme that allows everyone to travel across the country by public transport with a monthly ticket for €9. The three-month offer will expire this month, but there are calls for extending it further.
The "€9 ticket" project has two aims: to lure people out of their cars and help ease the cost of living crisis.
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Gas prices are eight times higher now than they were a year ago, while global oil prices are nearly twice their level since January 2021, resulting in rampant rises in living costs. Other European governments have also resorted to price caps and energy-tax reductions to stop rising wholesale energy prices to, at least, partially reduce the high cost to consumers. Payroll tax cut is in talks in the UK, while Spain and Portugal imposed ceilings on the price of natural gas used by power generators, and France put a cap on household energy bills, reports The Economist.
These are the responses of the governments of advanced and welfare states to help their people out of the crisis.
Let us see what others are doing. Malaysia has kept diesel price unchanged and capped the rise of petroleum prices since February. China does not change fuel prices as long as the global price remains within a certain range.
Neighbouring India hiked fuel prices several times in March and April this year because its fuel oils are linked to global market movement. Considering the impact of high fuel prices on public life, the India government cut taxes on diesel and petrol twice between November last year and May this year, reducing fuel prices at least by Tk15 per litre.
But the latest record hike in fuel oil prices in Bangladesh has not come up with any such measure to take some heat away from the people, already hard-pressed by spiralling prices of everything.
The highest rates hike in 20 years, which were effective on 5 August midnight, overnight made diesel and kerosene costlier by Tk34 per litre to Tk114, petrol by Tk44 to Tk130 per litre and octane by Tk46 to Tk135.
Meanwhile, debates are ongoing on whether the state's oil monopoly BPC was in profit or loss, or whether the massive price hikes could have been avoided.
It is good to see that the BPC stands out as a rare case of a profit-making public entity.
But what about the people to be protected from price shocks?
Currently the government levies a value-added tax (VAT) of Tk20.70 per litre on diesel and Tk23.51 on octane.
Could tax cuts be an option instead of hiking the fuel prices?
The answer is "yes".
The government could waive taxes on fuel oil during one of the worst economic periods of the country, said Dr Ijaz Hossain, a former professor of Buet.
Former agriculture ministry Secretary Anwar Faruque said the rise in diesel price will increase the cost of cultivating per bigha of land by Tk1,000, which may discourage farmers from rice farming, posing a threat to future food security.
There are around 15 lakh agricultural machines, 75% of which run on diesel, he said, and urged for fuel to be supplied at the old price. "We have farmer cards and the government can provide them with subsidised fuel," he suggested.
Mozammel Hoque Chowdhury, secretary general, Bangladesh Jatri Kalyan Samity, said their survey found that due to this fuel price hike, a city dweller's daily bus fare has increased by Tk70 to Tk200, making life in the city difficult for low-income people.
Diesel price hike has raised captive power generation cost in the apparel industry, while rising cost of living of workers may trigger wage pressure at a time when export orders are falling and product prices are dropping, knitwear association vice-president Fazlee Shamim Ehsan said. He felt that the price hike could be backed by well-calculated rates of fares in public and goods transport fares to keep the impacts reasonable.
Their suggestions and concerns aired at the discussion of the Centre for Policy Dialogue on Wednesday showed that options are still there to relieve people of the shocks from the latest energy price hikes.
After surveying consumer perceptions of the German scheme of €9 ticket, McKinsey says other countries can learn from Germany's current discounted flat rate travel pass to increase ridership on public transit.
Could we have something like this in our country?
Several lakhs students commute in buses in Dhaka and are often found locked in quarrels with bus helpers for students' half fare. Could there be an offer for them for a monthly discount ticket? Or for several lakh apparel workers, domestic help, low-paid office staff?
Couldn't the energy ministry keep kerosene and diesel for irrigation pumps out of the price-hike list?
State-run BRTC,Bangladesh Railway and BIWTC could be the pioneers in making such offers for discounted fares on long-haul trips and create an example for private operators.
Petrol accounts for 6% of Bangladesh's fuel consumption. It is mostly consumed by motorcycles, which, though considered by many as traffic nuisance, have become the saviour for many office-goers and students due to lack of a reliable public transport system in cities like Dhaka. Now, ride-sharing has become costlier as petrol prices have gone up.
Someone can argue octane accounts for 5% of fuel consumption and is used by car owners, who are rich and should be made to pay the higher price.
Then what should be the argument for hiking the price of the most consumed diesel that makes up 73% of total fuel consumption? Diesel is used in buses, launches, trains that form our fragile public transport system. It also runs the agriculture irrigation pumps and captive power generators used in industries.
Kerosene, which accounts for only 2% of the country's fuel consumption, will now cost marginal rural people more for using kerosene lanterns as load-shedding returns.
A sector-wise fuel consumption analysis shows that 63% of fuel oils are used in transportation and 15% for agriculture, while industry accounts for 7% and power plants 10%, domestic use stands at 2%. The wholesale price hike will definitely affect all sectors across the board.
Finance Minister AHM Mustafa Kamal has already warned that costlier fuel oils would shoot up the inflation, now close to 7.5%. Agriculture Minister Abdur Razzaque earlier said the diesel price hike will raise farming costs.
The day after the record hike, state minister for energy Nasrul Hamid had said, "We had no choice but to raise the prices."
Passing the extra cost directly to consumers is the easiest way that does not require any innovation.
Even if fuel price hike was inevitable and the extent of the hike is justified, there is still a scope for the government to step in with targeted support measures to lessen the adverse impact of wholesale hikes in fuel prices. The energy crisis and inflation are now global phenomena, and countries are showing ways to protect people from energy price shocks. Bangladesh needs to try some of these schemes for targeted groups of citizens, or find others which might be even more innovative, to help people during the tough times.
