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Fuel price hike: Cascading effect on commodity prices

2 years ago

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  • Businesses across several sectors impacted

By Yumiko Perera

  With the recent fuel price hike coming as a hard blow to the general public who is already worn thin from the third wave of the Covid-19 pandemic, things only seem to be getting worse. The sharp rise in fuel prices has already started impacting the public, as prices of many commodities are expected to increase due to the fuel price hike, and would undoubtedly have a cascading effect on various businesses across several sectors. While a great deal is being discussed on the matter, the public transport sector is already mulling a hike in rates owing to rising operational costs, whilst bakery owners, farmers, traders, fisherfolk, and many others from several other sectors have already been put into a tough spot. Furthermore, taking into account the fact that most goods and products people use daily are transported from different parts of the country, the cost is likely to rise further. All-Island Private Bus Operators’ Association General Secretary Anjana Priyanjith, in a press meeting held recently, stated that bus fares would have to be increased by at least 25% if the transportation sector is to operate with the recent hike in fuel prices. Given the travel restrictions that are in place at present, mobile vendors that provide their services would also be heavily impacted, the brunt of which the general public will have to ultimately bear. According to All Ceylon Bakery Owners’ Association (ACBOA) President N.K. Jayawardena, they have been left with no other option but to increase the price of all their products, barring the price of bread, in order to make up for the production cost. Speaking to The Sunday Morning, Jayawardena stated: “Not only diesel, petrol, and kerosene, but the main ingredients used in the bakery sector are coconut and palm oil. The prices have gone up significantly and taking all of these into account, the bakery owners have had to resort to increasing the prices of short eats and other bakery items, except for bread.” Stating that if the situation persists, they would have to shut down operations completely, Jayawardena went on to say: “After palm oil had been banned, the oil can, which was available for Rs. 8,000, is now Rs. 13,000, and now with the fuel price hike, I don’t know what else awaits us.” On the other hand, the fisheries sector also has had to bear the brunt of the recent turn of events. Commenting on the matter, National Fisheries Solidarity Movement (NAFSO) National Convener Herman Kumara stated that the hike in fuel prices has set the fisheries sector in a very tough spot. Speaking to The Sunday Morning, Kumara stated: “From one side, the economy of the fisherfolk has taken a hit thanks to the pandemic, and the situation was further aggravated with the recent X-Press Pearl disaster. People are still hesitant to purchase fish and that has been a big blow to the fisheries sector. On the other hand, owing to the monsoon season and the adverse weather that prevailed, along with the fishing ban owing to the X-Press Pearl disaster, most fisherfolk had been unable to set out for their trade and the income of the fisherfolk hit rock bottom.” According to Kumara , with no proper income, and now a price hike in fuel, the fisherfolk have been left with no means to fend for themselves and even the Rs. 7 increase in kerosene is a burden they may not be able to bear. He also went on to say that small boat owners would be the most affected by this move, as they are unable to get a fair price for their catch, with the middlemen benefitting. Stating that the NAFSO has received multiple complaints about a reduction in the catch in several areas from Negombo up to Kalpitiya, Kumara also alleged that the X-Press Pearl disaster may have done more harm than what the authorities let on. The Government’s decision to increase fuel prices has been a low blow to the entirety of the farming community, according to All Island Farmers’ Federation National Organiser Namal Karunaratne. Stating that the machines used in the cultivation process run on fuel, and most farmers use motorcycles, three-wheelers, and lorries to transport their produce, the fuel price hike has added to the troubles the farmers are already facing due to the fertiliser issue. Speaking to The Sunday Morning, Karunaratne said: “The Government has left no stone unturned to make the lives of the farming community a little harder every day. Farmers are in dire straits due to the lack of fertiliser, and the Government seems to come up with these policy decisions overnight without thinking about the consequences.” Furthermore, National Movement for Consumer Rights Protection Chairman Ranjith Vithanage lamented that many complaints have been coming in from across the island with regard to increased prices of rice, fruits, and vegetables. “The price of rice has gone up significantly, and all commodities are nearly twice as much as its original price. If you look at things like dry fish, sprats, and even fruits and vegetables, there are significant rises in the prices, with the main reason being the intervention of middlemen. The rise in fuel prices would only add to troubles,” Vithanage stated. While several attempts made by The Sunday Morning to get in touch with Consumer Affairs Authority (CAA) Director Asela Bandara proved futile, many complaints with regard to the hike in fuel prices had been made, The Sunday Morning learnt. According to Advocata Institute Chief Operating Officer (COO) and economist Dhananath Fernando, fuel prices are not adhering to the market dimensions. “Fuel prices are connected to all other commodities and a hike in its price would have an impact on the prices of these commodities. However, the bigger picture is, fuel prices have not adhered to the market dimensions and that seems to be the main problem,” he explained. He went on to say that even if fuel prices had not been increased, the loss would have to be covered by some other means, and ultimately, it would come back to the consumers in some way. “What we can do to minimise the impact it would have on the consumers is undoubtedly the tricky bit,” he added. According to Fernando, fuel prices of the world are increasing, which indicates that fuel has become a scarce resource. “Furthermore, a multitude of reasons factor into the hike in world oil prices, and ideally, what should be done is to allow the markets to work. By that I mean the price has to indicate whether oil is a scarce resource or not. In Sri Lanka, however, when you have a fixed price, it doesn’t reflect if it’s a scarce resource or otherwise,” concluded Fernando. Several attempts made by The Sunday Morning to get in touch with Minister of Trade Bandula Gunawardana for more insight in this regard proved futile. While the President’s Media Division (PMD), in a statement issued earlier this week, cited the continuous rise in world crude oil prices over the past few months as one of the main reasons for the increase in fuel prices, the PMD stated that the Ceylon Petroleum Corporation (CPC) has been a loss-making institution relying on loans from Bank of Ceylon and People’s Bank every year. As per the PMD statement, the price increase is only one key factor in a common strategy that strengthens the local economy which aims to strengthen the country’s banking system and maintain low-interest rates, reduce foreign exchange spending, and strengthen the exchange rate. The PMD further reiterated that the move had been made in order to safeguard the health and welfare of the people and to transform the import-dependent consumer economy into an investment and consumer economy dependent on domestic production.   ----------------    BOX:  Prices and impending hike   
TYPE OF FUEL    PREVIOUS PRICE   (Per litre)  PRICE AT PRESENT  (Per litre)  INCREASED BY  (Per litre) 
92 octane petrol  Rs. 137 Rs. 157 Rs. 20
95 octane petrol  Rs. 161  Rs. 184  Rs. 23 
Auto diesel  Rs. 104  Rs. 111  Rs. 7 
Super diesel  Rs. 132  Rs. 144  Rs. 12 
Kerosene  Rs. 70  Rs. 77  Rs. 7 
 
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