The New Nation - Internet Edition

Staff Reporter

The Government is learnt to have brushed aside the Asian Development Bank's advice for the increase of fuel prices immediately to avoid further price hike of essentials and sufferings of the people.

"We will not raise oil prices until the end of boro season in April," said Dr M Tamim, a Special Assistant to the Chief Adviser, who is in charge of the Ministry of Power, Energy and Mineral Resources.

Boro is the major variety of rice in the country, which is suffering from 20 lakh (2 million) tonnes of foodgrains due to the damage caused by the Super Cyclone Sidr that had hit in November and two

consecutive floods from May to September last year.

In April 2007, the Government raised prices for diesel and kerosene by about 21 per cent, but the Asian Development Bank (ADB) said it was not enough.

"Even after this price adjustment, the implicit subsidy for diesel and kerosene is estimated at US $1.2 billion or 1.6 per cent of GDP in the fiscal year of 2008," the Asian Development Bank said in a report published last week.

The domestic price of diesel and kerosene is at least 45 per cent lower than in international markets.

The government has said it needed to keep fuel prices much below international levels to bring down soaring inflation and protect the poor.

The ADB said, however, low domestic costs were benefiting the rich and suggested direct fuel subsidies to the poor as a better solution.

The ADB said in its latest quarterly report on Bangladesh's economy that the administered prices of petroleum products combined with rising world crude prices had already generated substantial fiscal costs to government.

"Underpricing of energy products poses considerable risk in macroeconomic management," the report argued justifying its suggestion for raising the fuel price.

The Government shouldered a liability to the tune of US $1.1 billion of the state-run Bangladesh Petroleum Corporation (BPC), the sole importer and distributor of oil, in the current fiscal 2007-2008 for smooth functioning of the company.

BPC will have to spend 35 per cent more on fuel imports than that of last year due to high world prices of the petroleum, official sources said.

Ruling out a fuel price hike immediately as per the ADB advice, Dr M Tamim said another fuel price hike would jeopardise Boro production, the economy and push the prices of the essentials upward further.