Govt. must intervene to cushion hikes in fuel price

[posted 2 Nov 2005, 1600]

Opposition Leader Mahendra Chaudhry has called for government intervention to cushion the adverse socio-economic effects of rising fuel prices.

The call comes in the wake of increases effective today that raise the price of motor spirits by 20c a litre to $1.83c a litre, diesel from $1.40 to $1.48 and premix from $1.40 to $1.48c a litre.

“The cost of fuel has gone beyond what the economy can sustain. Our shrinking economy cannot take the spiralling and inflationary impact of another exorbitant increase in the price of fuel,” Mr. Chaudhry said.

The impact of further price increases will definitely hit the poor hard now that the cost of kerosene has gone up to $1.51 cents a litre. Other users have not been spared either as cooking gas has shot up another $2.50 to $37.50 for a 13kg cylinder, he said.

The latest price hikes will create inflationary pressures that cannot be sustained. Businesses cannot absorb any further increases and will pass the costs down to the consumer; likewise, farmers will be hard hit as the cost of transporting produce to the mills and the market will rise. Bus and taxi fares will need to go up correspondingly.

Price of market produce, food items and goods in general will increase, hitting hard those vulnerable sectors of society already struggling to make a living.

So far the government has turned a blind eye to rising cost of fuel. It can no longer ignore the massive increase, and the threat of further increases in the near future. Government must step in and take measures that will provide some relief from the ever-rising cost of fuel.

“It must remove VAT from fuel or reduce Customs Duty,” Mr. Chaudhry said.

“I made this call in my response to Budget 2005 in Parliament last year. My pleas were not heeded then. I hope this time around the government will listen because the economy is not in a position to sustain any further hikes in fuel prices,” he said.

Altogether, by way of VAT and Duty government takes 51c a litre on motor spirits, 26c a litre on diesel and 42c a litre on pre-mix. Kerosene is taxed at 7.5c a litre for VAT plus a 3% duty on landed cost.

“It is critical to cushion cost structures in the transport, manufacturing, energy and the agricultural and fisheries sectors from the shock of this price upsurge,” Mr. Chaudhry said.