The dependable fuel hike

Tuesday, 1 November 2011 00:38 - - {{hitsCtrl.values.hits}}

IT is said that there are two constants in life – death and taxes. To this, it is practical to add fuel hikes and the latest increase is just another example of how the lack of a clear and transparent price adjustment policy undermines the vibrancy of the economy.

This is the second price increase of 2011 but it is clear that the revisions did not come when they were supposed to due to political considerations. Fuel increases before an election is bad for votes, everyone knows that, but the question is whether the Government is justified in randomly increasing prices without giving people a chance to adjust themselves, or minimising the blatant wastage and corruption of the Ceylon Petroleum Corporation (CPC).

The Central Bank last week revealed that the petroleum imports bill rose in the first eight months by 50.5% to $ 2.98 billion. In the month of August the import bill jumped by 155% to $ 488 million in comparison to $ 192 million a year ago.

The country by August 2011 had almost reached the 2010 full year import bill, which was $ 3.018 billion, up by 40% in comparison to $ 2.16 billion in 2009. The sharp rise in fuel import bill has been a key contributor to the country’s trade deficit widening by 88.4% to $ 6 billion by end August this year.

The Central Bank said the average import price of crude oil stood at $ 107.74 per barrel in August 2011 compared to $ 73.53 per barrel in August 2010. It is true that this is beyond the power of the government but it cannot wash its hands of the matter that easily.

Citizens know better. They know that there is massive malpractices and corruption within the State run CPC that results in huge losses. The CPC also lends to other Government organisations that do not settle their bills, resulting in additional losses. Another reason is that due to political reasons the Government prefers sporadic price increases, usually after elections, rather than having a transparent process that will benefit consumers if the global market prices decrease.

With careless management of the environment the changed weather patterns are playing havoc with the hydro power generation of the country. It is practical to expect that adverse weather conditions will increase oil imports to the country on an annual basis. Therefore it is also imperative that the Government take strong measures to protect the environment and also encourage renewable energy generation that functions outside of the national grid.

Since oil is a finite resource, it makes sense to expect oil prices to increase consistently. This means that the big picture must be kept in focus by taking strict measures to keep all dimensions of the economy on a conservative energy plan. This includes better hybrid technology and green industries.

So it is not quite so easy for the Government to blame global market prices and other reasons for consistently failing to get its own act together. With the Budget on the horizon, one can only await more surprises and know that with the New Year, another hike will be on the way.

It really is as constant as death and taxes.