Fuelling late hike

Monday, 31 October 2011 00:00 - - {{hitsCtrl.values.hits}}

The much-delayed fuel hike in the aftermath of rising oil prices came into effect from Sunday morning, whilst the quantum of the increase was unprecedented.

Petrol prices were increased by Rs. 12 per litre and diesel by Rs. 8 per litre, in what was the second upward revision so far this year, though the country’s oil imports bill had risen sharply.

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.

Analysts warned that the Government needed to go back to the era of monthly revision instead of often politically-influenced irregular changes.

The hike implemented yesterday was anticipated especially after it was deferred previously on account of the local government elections of 8 October. The last time fuel prices were revised was in April this year.

The latest move will fire a chain reaction of upward revision in prices of goods and services dependent on fuel and transportation.

The deferment or non-implementation of fuel price hike was one of the factors cited by the Government this year as support to boost the economy, including the private sector, the SMEs and the public.