The caretaker government increased prices of petroleum products for the second time during its tenure yesterday, 15 months into the last hike.
This time around the prices went up by 33 to 37 percent compared to the previous hike of 13 to 21 percent in April last year.
The new petroleum price regime went into effect immediately after the government announcement yesterday.
The new price of diesel and kerosene is Tk 55 a litre which is about 37.5 percent or Tk 15 more than their earlier price of Tk 40 a litre.
The new price of octane is Tk 90 a litre, which is 34 percent or Tk 23 more than its previous price of Tk 67 a litre.
Petrol is now Tk 87 a litre, up by 34 percent or Tk 22 from its previous price of Tk 65 a litre.
A cylinder of liquid petroleum gas (LPG) is now Tk 1,000, up from Tk 600, while a litre of furnace oil is now Tk 30, up from Tk 20.
Professor M Tamim, special assistant to the chief adviser on energy ministry affairs, told The Daily Star yesterday that the government had no alternative to increasing the prices of petroleum products. "We were helpless," he said.
The price of a barrel of crude oil was $60 last year, which went up to $143 yesterday, he said adding, "We would have to spend Tk 17,000 crore in subsidies if we did not adjust the petroleum prices for the new fiscal."
The government will still have to spend Tk 10,000 crore in oil subsidies despite the latest price hike in the prices of petroleum products, he said.
Asked how the price increase will affect the transport sector, M Tamim said, "There is no doubt that it will have an impact on the transport sector."
"We calculated that the cost of fuel constitute only 32 to 40 percent of the entire cost in transport sector. So the cost in this sector should increase only by 12.5 to 13 percent," he said.
The government expects that transport owners will not increase fares disproportionately. "We shall monitor it," Tamim asserted.
He said to offset the impact of high petroleum prices in agriculture, the government in this year's budget allocated Tk 540 crore for diesel subsidy to farmers, and if necessary, the amount will be increased.
The cost of transporting a kilogramme of rice from Dinajpur to Dhaka might rise to
Tk 1.493 from the previous cost of Tk 1.298, said a Press Information Department news release last night.
The price hike of diesel is also likely to raise bus fare to Tk 1.05 a kilometre, the release added.
Dr Uttam Deb, chief of research of The Centre for Policy Dialogue, said there was actually no alternative to hiking up petroleum prices, as the prices have been going up unabated on the international market.
"The government, however, has to be very careful, so the diesel subsidy for agriculture sector is duly implemented," he added.
The government also has to monitor strictly the transport sector, so owners do not raise fares disproportionately, Dr Deb noted.
According to a government estimate, 35.7 lakh metric tons of petroleum products were used in Bangladesh in FY 2006-'07, 65 percent or 22 lakh metric tons of which was diesel.
Sixty percent of the diesel was used for transports, 32 percent for agriculture, and the rest was used for other purposes.
Meanwhile, soon after the announcement of the price hike of fuel oil, hundreds of motor vehicle owners thronged different filling stations in the capital with expectation to buy fuel oil at the old rate for the last time before the increased prices come into effect.
But most of the filling station owners kept their pumps closed so they do not have to sell the fuel at a lower rate while many others kept the pumps open but refused to pump at the earlier rate.
Many motor vehicle owners and chauffeurs got locked into altercations with filling station employees and managements and even got into clashes at different places in the city.
During random visits to different filling stations The Daily Star found that clients were staging a demonstration for over three hours at a filling station Shahjahan Enterprise at Shahbagh.
Witnesses said a large number of vehicles remained parked around many filling stations.
When vehicle owners and chauffeurs became fierce, Shahjahan Enterprise management tried to calm them down assuring them of supplying three litres of fuel per vehicle.
Mohamad Sujan, a conductor of a bus on Gulistan to Airport Road route said, "We went to at least five stations between Azampur in Uttara and Gulistan, but all the stations denied us fuel supply.”