Price hike could have been avoided reducing tax: CPD

CPD organises a press conference titled 'Unusual price hike of fuel oil: could it be avoided now' on Wednesday.Tanvir Ahammed

Research organisation Centre for Policy Dialogue (CPD) has said high price of fuel oil has been imposed on the people as energy sector agencies have failed to rein in corruption and wastage.

The organisation said the price hike of fuel oil could have been avoided either by withdrawing tax on fuel oil or by reducing tax. But this is a big source of income of National Board of Revenue and they would not do this, CPD added.

The research organisation on Wednesday made such an observation in an article 'Unusual price hike of fuel oil: could it be avoided now?'. CDP organised a press conference at its Dhanmondi office.

The organisation described subsidy as waste of resources as it benefits both rich and poor. The subsidy must be stopped, be it under IMF conditions or not. It, however, could be done slowly.

Urging the government to review the price of fuel oil, the CPD said a price hike of 42 per cent to 52 per cent is unprecedented in the context fuel oil price. The economy is under a severe pressure due to domestic and global issues. When the people are being affected in various ways, such a price hike will help the inflation swell further.

The low and fixed income people would suffer the most as prices of all commodities would go up due to the price hike. Imports will increase if agricultural production in the country decreases. At the same time, exports will decrease if industrial production is disrupted, noted the CPD.

Ejaz Ahmed, a former professor of Bangladesh University of Engineering and Technology (BUET), said he supports withdrawal of subsidy, but not the way it has been done. The government may withdraw tax on fuel oil during the worst economic crisis. Rather, an indirect tax has been imposed on the people by hiking prices, which is a terrible discrimination. The poor will suffer severely when nothing will happen to the rich.

The CPD noted that state-owned Bangladesh Petroleum Corporation (BPC) made a profit of Tk 468.58 billion in the last eight fiscal years until May this year. The government collects tax from fuel oil at a rate of 34 per cent, in addition to annual profits. Moreover, it has taken a surplus fund of Tk 100 billion from the BPC treasury.

While presenting the article, CPD executive director Fahmida Khatun said many people are yet to recover from the impact of Covid-19 pandemic. Some of them are still living on their savings. Instead of arranging a relief, a pressure is being created on them.

Anowar Faruk, former secretary to the agriculture ministry, said Bangladesh is yet to face a situation that requires such a price hike at one go. The farmers would face a Tk 1000-hike in per bigha farming expenses as 75 per cent of machineries are run by diesel. At least, this sector should be provided fuel oil at the previous price. There is no scope to stop subsidies in agriculture. The nation will be in a big disaster if the production of paddy is disrupted.

BKMEA vice president Fazle Shamim Ehsan said it would be helpful for the export oriented industry if the price hike was avoided for now. The use of diesel has increased in factories due to lack of gas supply. It is quite impossible now to run the factories with diesel at the new price.

Meanwhile, the production costs are increasing. Also, it may need to increase the wages of workers due to the inflation, he added.

Mozammel Haque Chowdhury, president of Bangladesh Passenger Welfare Association, said his organisation talked to 350 passengers and 12 long-haul bus counters. According to ground information, the daily transport costs increased by Tk 70 to Tk 200 per person on an average in the city and by Tk 100 to Tk 300 on long-routes. The per kilometer fare has been fixed at Tk 2.5 for the city, but different bus companies are collecting Tk 3 to Tk 7 for a commute of one kilometer.

CPD senior research director Khondaker Golam Moazzem claimed that the price hike could have been avoided easily. He said subsidy management does not mean putting the burden on the consumers, rather reducing wastage. Where did BPC's profits go? It needs to ensure transparency in their income and expenses. The BPC had the financial ability to continue for some more days without imposing pressure on the consumers.

Considering the current situation, the CPD has made some recommendations, including revising the hiked price and bringing it down, increasing the sale of government products in the open market, increasing the number of ration cards and ensuring the facility to low-income and needy people.

Besides, the CPD suggested gearing up oil and gas exploration activities in the country as a medium-term measure to ensure primary energy.