... Bhutan to save Nu 1.3 billion to 1.7 billion a year in petrol and diesel prices
The price of diesel and petrol determines the inflation rate. Cost of transportation is a major driving force of inflation. Largely dependent on land transport, with all goods transported in the back of trucks, an increase in fuel price leads to an increase in the price of goods, including essentials, public transport and even housing. This was evident from the reaction to the news of the fuel price change. A common comment was calling for taxi drivers to “note the change” – in other words, to slash taxi fares.
While there is an automatic increase in fares and cost of transportation following a hike in fuel price, it is not so when the prices go down. With the price of diesel slashed by Nu 13 a litre and by Nu 12 for petrol, it is a big decline to bring an immediate impact on the cost of transport and therefore, essentials.
The high price of fuel, especially diesel, was attributed to policy interventions not being able to bring down the cost of goods. The government, to check inflation, slashed customs duty on goods imported from third countries not long ago. The duty covered almost 500 items, from fruits and vegetables, cereals and coffee, spices and seafood, which saw the duty by 30 to 40 percent. Did it bring down the cost? The answer is a big ‘no’ and the reason is that the increase in fuel price offset the slash in duty.
It might have been the case. However, with the biggest drop in fuel price, we should see the benefit trickle down to the consumers, starting from the cost of food, transport and construction materials. This would bring down the inflation rate.
No comments:
Post a Comment