The sudden hike in the price of all types of fuel has ushered in new worries for local industries that are already dealing with issues such as order drops and record-high inflation in export destinations, to name a few.
According to insiders, this hike is a harsh blow for every sector as it would lead to an increase in production and transportation costs and is likely to narrow the profit margin.
On the other hand, in an effort to reduce load-shedding, the government decided to limit electricity by keeping factories closed once a week.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid told the media on Sunday that industries of different areas will remain closed on different days of the week.
He also said that starting in October, it will be feasible to ensure a consistent supply of electricity throughout the country.
A number of the small manufacturers are likely to fall into a dire situation as they may stop producing due to being crippled by the abnormal hike in the fuel price.
On Friday, the government raised prices of diesel and kerosene by 42.5% to Tk114 per litre, octane by 51.1% to Tk135 per litre, and petrol by 51.7% to Tk130 per litre without any precaution or discussion with stakeholders.
Industrial insiders also said that the cost of fuel for the factories has already increased by 20%-40% from Saturday.
The hike in fuel price led to a steep jump in production cost by 12%-15% and also a sharp hike in logistics costs for the manufacturing sector by 20%-40%, they said.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), expressed concerns over the hike in fuel price saying it will have an impact on export growth.
He said on Saturday that many apparel industries will suffer losses and a number of them even risk shutting down.
The export earning target set for this year is unlikely to be achieved thanks to hiking in fuel price. Garment owners will count losses for already received orders and many factories won't be able to go for new production, he added.
He also said that there was a gas supply crisis in the factories and those are experiencing load shedding for five to six hours as per the government decision to save energy. In this situation, the increase in fuel price was a big challenge for the apparel sector, he added.
Talking to Dhaka Tribune, Shahidullah Azim, vice president of the BGMEA said Bangladesh may lose orders and competitiveness.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), also echoed similar sentiments.
Talking to Dhaka Tribune, Shovon Islam, managing director of Sparrow Group, said they usually take orders 3-4 months in advance.
“We have been working on bear margins for a long time due to the ongoing global crisis. But the hike in the price of diesel has to get us in grim trouble,” he added.
The government hiked the fuel price by 50%, but they didn’t discuss it with the business community.
The factories suffer about 5-6 hours of load shedding every day which leads to an increase in the use of diesel-fired generators, Islam also said.
However, the energy cost for producing a $1 worth item is 6-7% which may be doubled due to a 51% hike in fuel price, he added.
“It will also decline competitiveness, moreover, most companies will run at a loss for the next three to four months. We are in the dark about the actual situation as the current statement doesn’t match the statement of last week,” he added.
Md Khosru Chowdhury, managing director of Nipa Group, said that the operating costs of his factory are likely to increase by more than Tk70,000 per day thanks to ongoing power rationing and the latest fuel price hikes adding that per piece cloth production costs would go up by Tk7.
Esrat Jahan Chowdhury, director of Bangladesh Jute Goods Exporters Association told Dhaka Tribune that the production costs of raw jute and transportation costs would go up due to the sudden hikes in fuel prices.
“Transportation costs may increase by at least 30% and overall production costs by over 10% despite poor jute export earnings since last year. We do not know how we will survive,” she added.
An official of Bangladesh Exports Ltd, a leather-goods manufacturer, said that their production costs may increase by up to 20% as they need diesel to run their generators due to load-shedding of five to six hours every day.
“I already paid Tk28,000 for a truck fare which was Tk20,000 earlier. The transportation costs for per ton goods from Naraynaganj to Chittagong may experience a hike of Tk50-60,” he added.
In a statement, Dhaka Chamber of Commerce and Industry said that the country has just started to enter into an economic revival phase from the pandemic.
“The fresh hike in fuel price will have an immediate negative impact on transportation, essential commodities and electricity as diesel is the most consumed fuel in the country, nearly 73% and 90% of the transportation sector is dependent on diesel,” they added.
Considering the situation, they urged to ensure long-term energy security, to frame out a long-term strategy as well as to continue onshore, and offshore gas exploration, energy mix and cost and energy efficient electricity generation.
