In Bangladesh, whenever there is a hike in energy price, the consumers ask how much their food price is going to rise. The two are obviously related, but the amount that gets transferred from energy price to food price is not what it should be.
Diesel rose from Tk115 to Tk135 a litre on September 21, an increase of 17.4%. The recent price hike comes on the grounds that Bangladesh Petroleum Corporation’s loss has been mounting.
BPC lost Tk22,875 crore between March and August, and the budget FY 27 does not have any allocation to cover this loss. The Tk89,538 crore subsidy that the budget has provisioned for covers gas, electricity, and food.
BPC is recovering the loss by charging it to our pockets. But how much of the loss is it recovering? According to the government’s own formula, the market price for diesel should be Tk205 a litre. This means, at Tk135, we are still paying Tk70 less than what we should.
As such, the price hike only does a partial recovery of the loss for BPC -- about Tk10,000 crore of a Tk40,000 crore annual loss on diesel.
So was the price hike essential? Yes. Is it enough? No. Is there a risk of further price hike? Yes.
Then what would happen to the price of our food basket?
The evidence on how the rise in energy price transfers to food price in Bangladesh is scanty. Generally, the transfer is arbitrary and set by the traders.
We have results from April this year. The 15% adjustment then took food inflation from 8.39% in April to 9.06% in May, a gain of 0.67 percentage points in one month, before coming down to 7.02% by August. Non-food inflation rose and did not come back down.
In my reading, the current adjustment may add 0.7 to 1.2 percentage points to food inflation, with the peak in November or December.
However, that is the index. We need to measure what happens in the bazaars.
Let us look at one trader’s account from August 2022, after the largest rise in fuel price in our history. A Bogura trader moving fourteen tons to Dhaka increased his transport cost from Tk2 to Tk2.50 a kilogram. Freight is charged by weight, so that 50 poisha is what the lorry added to every kilogram of vegetable it carried, whatever the vegetable was.
In Dhaka, the price of okra went from Tk30 to Tk40 a kilo and long beans from Tk40 to Tk50. That 50 poisha of freight essentially translated to Tk10 a kilo for the consumer in Dhaka.
The Directorate of National Consumer Rights Protection did the same arithmetic on eggs three weeks later and published it. Their estimate showed that the fuel price rise had added four poisha to the cost of moving one egg. Traders put Tk2.70 on the price, and the wholesale margin went from under 20 poisha to Tk2.70 in four days.
Historically, fish prices have not moved with the price of diesel. Dhaka's tilapia, pangash, and rui prices were the same in the week before the September hike and the week after, while the price of ilish fell.
Farmed fish depends on electricity rather than on diesel. In June 2023, with no change in fuel price, koi, pangash, and tilapia rose Tk40 to Tk50 a kilo when ice plants could not freeze blocks during load shedding.
Ilish fishermen are heavily reliant on diesel as they go out for days at a time. But it is a buyer’s market and they cannot transfer the higher cost of diesel to the price of their catch. The traders dictate.
How about rice? The price transfer is not immediate. The rice on sale in Dhaka today was grown with diesel bought between January and early April, when the official price was Tk100 but farmers were paying Tk110 to Tk125 through the March shortage.
The Tk135 announced on September 21 enters the Boro crop planted this winter and harvested in April and May 2027. The transport cost immediately increased for rice when the cost of diesel was hiked. Four days after the hike, a sack cost Tk15 to Tk20 more at wholesale, and Paijam and Atash went from Tk56 to Tk60 a kilo at Mohammadpur.
From the analysis, we can reach some conclusions:
• The hike was necessary and it is not finished. A further adjustment is the base case, not a risk.
• Vegetables, rice, fish, eggs -- each carries the fuel cost through a different channel and on a different timetable, so a single pass-through figure is meaningless.
• The gap persists because nobody analyzes how the value chain works, so the price shifts to whoever can charge the most without challenge.
How do we solve these challenges?
Ensure that people know that traders cannot just arbitrarily raise prices when energy prices are hiked, and the only way they will know is if someone publishes the number. As most people are unaware of how price is set and transferred across the levels of the value chain, they accept whatever comes their way. The default assumption here is that the price is bound to rise.
The government should set a threshold for how much margin can be added at each stage of the chain and this should vary by commodity. The price transmission should follow the variability. A threshold on the margin is not a cap on the price.
Publish what each stage of the food chain adds, every month, as a standing official series. Price caps do not work and have never worked. The Philippines capped rice in September 2023 and the national average came in 16% above the ceiling. Hungary capped retail food prices for 17 months and recorded the highest food inflation in the European Union.
What has worked is publication of the margin. South Africa's Competition Commission publishes an essential food price monitor that sets the producer price against the retail price commodity by commodity.
Hungary, having failed with caps, switched in 2025 to a ceiling on the retail margin published alongside a public price monitor.
A cap hides the mark-up. A published margin forces the chain to pass costs in both directions. Bangladesh already collects the daily prices through the Department of Agricultural Marketing. What it does not publish is the spread.
Economies are always correcting themselves. That is not the failure. The failure is when we cannot ensure the conditions that allow the economy to be resilient in stormy weather and bullish when the sun is shining.
In Bangladesh, our economic governance runs on perforated umbrellas. When it rains, we get wet. When the sun comes out, we burn.
Md Rubaiyath Sarwar is Managing Director, Innovision Consulting.