The increase in fuel prices will have the greatest impact on economic activities that depend on diesel.
Diesel is directly linked to the lives of ordinary people and is often referred to as the fuel of the poor. Its use is connected with almost every sector of the economy, including agriculture, public transport and goods transportation.
As a result, an increase in diesel prices will affect everything from transport costs to production expenses.
As electricity supply in the country is still not completely uninterrupted, some industrial units have to use diesel-powered generators as an alternative.
Generating electricity this way costs three times more than using grid electricity.
Therefore, the increase in diesel prices will directly affect both locally consumed and export-oriented production. This will further increase the cost of doing business.
The impact could eventually be reflected in the prices of goods. At a time when businesses are already facing declining sales, higher production and transport costs will create additional pressure. If the prices of goods rise, there will also be a risk of renewed pressure on inflation.
The government must also consider the burden of fuel subsidies. It has been argued that although fuel prices in the international market have remained high for a long period, the government has not made regular adjustments in line with those prices.
Therefore, although a price adjustment may be necessary, a sharp increase at once could place additional pressure on businesses and ordinary people.
In this situation, if the downward trend in international fuel prices continues, the government should make adjustments quickly at home as well.
By returning to the regular fuel price adjustment mechanism it had introduced, the government has an opportunity to pass on the benefits of lower international prices to consumers.
It is also worth considering whether increasing fuel prices is the only solution to the problem. Reducing wastage and system losses in fuel supply and distribution could create an opportunity to lower costs.
Although raising prices may be an easier option than improving efficiency, it could have greater economic and social consequences.
On the one hand, the government says it wants to make doing business easier; on the other, higher fuel prices are directly increasing business costs.
Maintaining a balance between these two initiatives is therefore important at the present time.
In particular, higher fuel prices could create additional pressure on businesses already facing inflation, declining sales and rising operating costs. Overall, fuel prices have been increased at an uncomfortable time.
Therefore, when determining fuel prices, the government should consider not only its revenue and subsidy calculations but also the overall impact on agriculture, transport, industrial production and ordinary consumers.
I would like to reiterate the demand for rapid price adjustments when international fuel prices fall.
At the same time, initiatives to reduce wastage in fuel management could help keep the pressure from price increases under control to some extent.
The government’s revenue is not increasing, while expenditure will rise from next month because of the increase in salaries. As a result, the pressure on government expenditure is also increasing.