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40pc hike in fuel prices creates four lakh new poor people

Shamunnay research reveals

Star Business Report
A 40 percent hike in the prices of diesel and kerosene will lead to more inflation and creation of four lakh new poor peoplein the country, according to a research paper.
“Inflation directly affects the poor people, so the government should have a clear direction on its policy about the amount it could save from the petroleum sector by increasing the price," eminent economist Wahiduddin Mahmud yesterday told the launching ceremony of the fourth issue of the Bangladesh Economic
Outlook, a quarterly published by Shamunnay, a local thin tank.
The research paper that was published in the current issue of the journal also remarked that the number of poor people would have reached around 3 lakh if the diesel and kerosene prices were raised by 25 per cent.
While discussing about the outcome of the research, Mahmud further said, “The government could save its subsidy by increasing the price of petroleum, so the savings should be used for the people who would be affected."
The government increased prices of petroleum products on Monday for the second time during its tenure, which is a sharp rise to 33 to 37 percent from the previous hike of 13 to 21 percent in April last year.
The new price of diesel and kerosene is Tk 55 a litre, a 37.5 percent up, orTk 15 more than the earlier price.
According to a government estimate, in FY 2006-07, around 36 lakh tonnes of petroleum products were used in Bangladesh, 65 percent of which was diesel. Sixty percent of the diesel was used for transports, 32 percent
for agriculture, and the rest was used for other purposes. The price hike of diesel is also likely to raise bus fare to Tk 1.05 a kilometre.
Mahmud, a professor of Economics at the University of Dhaka, also a former adviser to the caretaker government, pointed to the fact that the price hike of petroleum products is an influence of international market. He, however, blasted the government for increasing the price of kerosene.
Professor Mahmud suggested that the government should lay emphasis on new employment generation to address the present situation.
Economist Dr Atiur Rahman, also the chairman of Shamunnay, said the government could save Tk 7000 crore by reducing the subsidy from energy sector.
"The consequence of the increased price of diesel would make four lakh people poor, so the government needs to spend the savings for them,” he said, urging the government to reduce system losses in different sectors.
In his keynote paper, Dr Selim Raihan, associate profes-sor of Economics, Dhaka University, said the budget deficit and domestic borrowing increased in the last two years, which had negative impact on national economy.
He expects a rise in investment in different sectors like readymade garments (RMG), pharmaceuticals and financial institutions by the year-end, as the coming election makes the entrepreneurs hopeful of political stability.
Amjad Khan Chowdhury, chief executive of Pran-RFL Group, was also present at the ceremony.