DHAKA, May 24: The Bangladesh government on Tuesday increased the prices of diesel by Tk3 per litre and of petrol and kerosene by Tk2 per litre, with immediate effect. The price of diesel was hiked to Tk26 from Tk23, and that of kerosene to Tk25 from Tk23. The price of petrol was hiked to Tk35 from Tk33 to make its price equal to that of octane.

Prime Minister Khaleda Zia approved the price hike when Finance Minister M. Saifur Rahman along with State Minister for Energy and Mineral Resources AKM Mosharraf Hossain met her at her office.

After the announcement of the price hike, the state minister admitted to the press that the increase in the price of kerosene would affect poor people, especially those who live in villages. However, this is the fourth hike of the prices of kerosene and diesel and the third hike of the price of petrol after this government took office in October 2001. It increased the price of octane twice. Octane’s last price hike was on January 3, 2003.

In total the price of diesel was increased by Tk10.5, that of petrol by Tk12, kerosene by Tk9.5 and octane by Tk10 in the tenure of the present government. The proposal, placed before the prime minister, says prices of fuel needed to be increased, as the oil prices have shot up in the international market, and the Bangladesh Petroleum Corporation suffers an annual loss of about Tk25,000 million to Tk30,000 million because it has to give subsidies.

The ministers proposed that the prime minister should reduce import duty on fuel in the coming budget to reduce the corporation’s losses. The corporation paid Tk30,870 million as duty to the government’s exchequer in the fiscal year 2003-04. The ministers informed the prime minister that the per-litre price of diesel on the international market is Tk35.27, of kerosene Tk38.35 and of octane Tk35.05.

The price of diesel in India is Tk41, of kerosene Tk57 and of octane Tk65, they said. Mr Hossain claimed that a huge amount of diesel was being smuggled to India because of the wide gap between prices in the two countries. He said the petroleum corporation would suffer a loss of Tk17,000 million for importing diesel and Tk3,750 million for importing kerosene if the prices were not hiked. The price hike will reduce its loss by Tk8,000-9,000 million, the minister claims.

To check adulteration of octane, the price of petrol needed to be made equal to the price of octane, which was Tk35, Mr Hossain said. The government imports around 2.04 million tons of diesel, 0.693 million tons of kerosene, 0.14 million tons of octane and 0.15 million tons of petrol every year.

Mr Hossain said if the prices of each litre of diesel, kerosene, petrol and octane were increased by Tk1, the government would save Tk2,263.86 million, Tk809.17 million, Tk96.9 million and Tk83.6 million, respectively.

Mr Hossain told reporters that the fuel price hike would not affect the agriculture sector, as the rice cultivation season was over and the next season would start after a few months.

Referring to the need for subsidizing diesel for the farmers, the minister said that finance and agriculture ministries would take a decision in this regard.