THE Bangladesh Energy Regulatory Commission indicated in March that it would give a nod to the proposed compressed natural gas price increase but it would be less than the 48 per cent sought by Petrobangla. '…we will allow a rational increase in prices considering the economic interests of all —- in the context of reality,' said the commission's chairman Syed Yusuf Hossain (The Daily Star, March 9).
What happened in two months since then that led the commission to allow a higher than Petrobangla-suggested price hike? Instead of consumer friendly and tolerable 'rational' price hike, consistent with the 'reality' of their pocket book, why did it raise the price by nearly 50 per cent?
The answer is: it has little to do with consumer prerogative or welfare. It has less to do with the placebo talk of 'rational' increase. It has more to do with the insatiable government hunger for higher revenue. The hearing for price adjustment is a public show to maintain the decorum and legitimacy of an autonomous agency. The final decision is based on official directives.
At the BERC hearing, consumer groups and CNG users opposed the proposal asserting that the action will further boost prices of essentials. They feared that enhanced CNG price might discourage use of clean fuel and increase environmental pollution.
In response to the consumer concerns, remarks attributed to the Petrobangla chairman, Hussain Monsur, in the media are followed by my observations:
The gap between prices of petroleum and CNG discourages use of petroleum products such as diesel and octane produced in local gas fields.
I did not know that diesel and octane are by-products in local gas fields. There is sufficient demand for both. Successive regimes promoted the use of CNG to save foreign exchange spent to import petrol and diesel. The petrol- and diesel-driven two-stroke vehicles were banished from the city to diminish pollution. Has the government now changed the policy?
'It is an excuse that transport costs will go up due to increase in CNG prices. Fares are not charged following rules. Fares should be fixed and enforced…'
The arbitrary increase in the bus and auto-rickshaw fares did not wait for the government decision. And the government has now approved a robust increase in the fare.
'CNG is used by the rich who use cars. …they want to use gas at low prices. The increase in CNG prices will benefit the 16 crore population.'
The concept that only the rich use CNG is rubbish. This class-warfare talk may get cheap applause. Public transports, availed mainly by the poor and middle class, use CNG. The 16 crore people 'benefited' surely did not include the ones who commute on CNG-driven vehicles now with much higher fare. The CNG price rise will also contribute to already spiralling prices of essentials.
The government revenue will shoot up and the increase will help generate additional revenue of some Tk 900 crore.
That is the whole purpose. All the rest, including the benefit to the masses, CNG as a rich man poor man divide and no adverse impact, etc, are mere equivocation and drivel.
The BERC Chairman towed the same line with similar insensitive comments. He claimed that only the rich with fancy cars will bear the brunt of the higher price and others will be spared the adverse impact. My respectful and candid albeit allegorical question is what seventh heaven, what ivory tower and what white castle these gentlemen reside in?
This is a country where chicken prices go up when there is a bird hiccup in a remote Vietnamese village, price of edible oil goes up when there is a wind storm in Argentina and sugar price increases when pests swirl around a sugarcane field in Brazil. Wheat price jumps when there is a cold wind in Topeka, Kansas and vegetable prices show an upward trend with half an inch rain in Narsingdi.
When most businesses look for lame or absurd excuses to increase prices, why would bus and auto-rickshaw owners react differently to a sharp CNG price rise? For anyone to think that the owners will meekly accept a 50 per cent price hike without augmenting the fares is living in a fool's paradise.
One scholarly BERC member explained the rational for approving the CNG price jump by claiming the enhanced price is 15 per cent lower than the price in another country and 47 per cent less than that in New Zealand. Among all the superficial equivocations to unpersuasively justify the price hike, this probably is the flimsiest.
The commodity prices are both absolute and relative. If you claim that certain items are costlier in Singapore or New Zealand, you also have to take into account the per capita income and standard of living in these countries relative to Bangladesh. Americans can dole out a $1 (Tk 70) as bus or subway fare to a close destination. For an average Bangladeshi Tk 70 is dearer and more valuable than that.
There is no good time to bump the CNG price but the timing of this price increase is particularly inopportune. It followed the hike in fuel oil prices by Tk 2 per litre. The increase in the price of fuel oil and liquefied natural gas in quick succession has been a one-two punch against the consumers, with shrunken pocketbooks and purchasing power due to the high prices of staples and essential commodities. The solemn election pledge of the ruling alliance for price control has long been reduced to tall talk and all talk verging on a cruel hoax.
The rational for fuel oil price increase was to offset the losses the government has been incurring due to steep crude oil price rise on the global market. There is no such excuse for increasing CNG prices because it is produced from locally extracted natural gas.
There was turmoil and commotion with arbitrary bus and auto-rickshaw fare increases. After few days of chaos and disorder, the government formalised the official increase in the fares. The users are left to carry the extra burden of the big bus fare rise, averaging 30 per cent in the city with the minimum fare raised from Tk 5 to Tk 7. A 22 per cent increase has been approved for long route buses. The auto-rickshaw fare will increase to Tk 7.50 from Tk 7 per kilometre.
Two ministers representing the government negotiated with the transport owners and labour leaders. There was no presence of any commuter representatives or consumer lobby. The owners are satisfied and the ministers seemed happy. The administration seemed to have largely granted owner demands.
The fare increase is yet another burden the consumers, already reeling from high inflation and high prices of essentials, will have to bear. The other shoe will drop with the rise in the prices of consumer goods resulting from higher transport cost.
The rise in fuel and CNG prices has both a chain and a multiplicative effect. It raises the transport cost of producers, wholesalers, middlemen and retailers. So every step of the way the price of each commodity increases step by step. They all add up to an ample price boost.
Also, when the CNG driven transport fares rise, so does that of alternate transports such as rickshaw due to substitution effect. In addition to the means of transport, the expected outcome of the energy price climb is soaring prices of goods and services. This will contribute to further cost-of-living increase. For people tormented by exceedingly high commodity prices this adds to the collective misery index.
Now we can delve into the crux of the matter and root cause of CNG price rise. In March 2010, the finance minister, AMA Muhith, directed authorities to increase the prices of CNG and electricity. 'Petrobangla should immediately send proposal to increase the CNG price. The power tariff should also be reviewed for a further hike,' he told the officials of the power and energy ministry. He expressed same opinion reputedly thereafter. The energy regulator commission has fulfilled his fond wishes.
Hefty funds are needed for high electricity costs from rental and non-tendered power plants and escalating government expenditures. The stagnant investment climate and economic downturn are detrimental to lofty revenue growth. Mounting government borrowing from banks has put a further crimp in the liquidity crunch. The steep CNG price hike will lead to significant revenue growth, and partially whet the insatiable appetite. The turmoil and despair are less important in priority considerations. Consumers truly are in dire strait.
Source: New Age
