Bangladesh raised fuel prices with effect from Friday in its third such hike since May, a move that will trim the country's subsidy burden but put more pressure on persistently high inflation. The hike gives ammunition to opposition political parties looking to dislodge the government before the next election, due by the end of 2013, since the step is likely to boost prices in a country where annual inflation was 11.97 percent in October.
"The hike will have a bad impact on people's spending but we have no other option but to raise oil prices," an energy ministry official said. "If oil prices are not adjusted, the subsidy for fuel import alone could be more than $2 billion in the current fiscal year that will end in June 2012."
Petrol, octane, diesel, kerosene and fuel oil will now cost an additional 5 taka ($0.065) a litre. The price of petrol has been fixed at 86 taka a litre, octane (RON 95) at 89 taka, diesel and kerosene at 56 taka and furnace oil at 55 taka. The government last hiked oil prices in September.
State-owned Bangladesh Petroleum Corporation (BPC), the country's sole oil importer and distributor, was paying around 21 taka a litre in subsidy for diesel and for kerosene, and around 10 taka for fuel oil. The latest fuel price hike will allow BPC to cut its losses by nearly 40 billion taka ($520 million), energy officials said. Bangladesh's demand for diesel and fuel oil is growing sharply as a shortfall of natural gas forced it to turn to costly oil-fired power plants to resolve its crippling electricity shortages but swelling its trade deficit. The country's foreign exchange reserves fell to $9.6 billion on Thursday, the lowest level since September 2009.
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