Fuel price jump to hit food bills

An economist says the government should bear some of the fuel cost so that the general public can survive

The drastic increase in the cost of petrol and diesel will end up being passed on to the consumers, according to an economist, Dr. Damber S. Kharka.

He added that the surging fuel prices come on top of other pressures on shops and retailers.

“The households are facing a cost-of-living crisis as inflation soars during the lockdown and now, the transport cost of essential commodities such as food grains and meats will shoot up and is expected to be passed on to the customers soon,” Dr. Damber S. Kharka said.

“With fuel prices hitting record high, it will pass on as increased transportation costs to the food shops and retailers, who will, in turn, pass on those costs to the consumers,” he added.

The economist shared that food price inflation is already happening, but this is going to make it worse because there will be charges passed on to the customers and then obviously to the end-users as well.

“People buying food and drinks in shops, when they’re eating out, will be paying more because the cost of distributing those goods to the outlets has gone up so much,” he said.

However, the impact of the high cost of fuel falls all across the economic sectors. Transportation becomes much costlier and consequently the consumers’ goods.

Meanwhile, the prices of petrol and diesel in the country increased by more than Nu 10 and 17 respectively. A liter of petrol will cost Nu 95.19 and diesel Nu 100.55 from Thursday morning.

Dr. Damber S. Kharka said the already high inflation will further speed up burning everyone’s pockets and livelihoods, and real income of every individual will shrink. 

“The government should bear some parts of the increased fuel cost so that the general public can survive through this difficult time,” he said, adding that the government has no other short-term measures other than that. For the long-term, the government should improve the public transportation system and encourage electric vehicles through subsidization.

Impact of surging costs

One of the wholesale distributor firms in Thimphu said that the cost of delivery of food and non-food to retail, shops, and the public sector, such as schools and care homes will not remain the same as before with the drastic increase in fuel price.

“If we are distributing goods around the network, fuel costs will be 25% to 30% of your distribution costs,” he said, adding that wholesalers who are buying on what’s known as the spot markets are seeing their costs go up. So, it’s a huge impact, and that then leads to the addition on the customers.

He said the latest fuel rises were adding to existing cost pressures. “When we think about all of the other pressures in the supply chain which have been going on for the last two years and beyond, it makes it difficult.”

He added that the ultimate thing is that the consumers have to spend more on food and drinks at a time when the fuel prices are going up, and at a time when the cost of living is going up hugely due to the current situation of the Covid-19 pandemic.

Another wholesale distributor said that if fuel prices remained high, the cost of essential items would surge in a week or two.

Many wholesalers had already been bracing the brunt of added costs from February, due to the high cost in transportation from Phuentsholing and Samdrup Jongkhar.

“It’s a massive problem; it seems to be swallowing all of our money. We haven’t got over Covid yet and just starting to pick up again, then we have been hit with this. There’s no respite,” he said.

He added that they have got no choice but to put some prices up because it’s not sustainable. Fuel price rises are coming on top of the cost pressures that retailers are already facing.

“Rising fuel prices are putting further pressure on retail supply chains, pushing up the cost of transportation, heavy goods transport, and final mile delivery,” he said.

Kinley Yonten from Thimphu