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Inflation expected to jump sharply
The steep hike in fuel price is adding to the misery of the people hit hard by the pandemic. The cost escalation in goods and services due to the fuel price hike has many worried about making ends meet.
The price of diesel has increased by Nu 17.18 (almost 20 percent) and petrol by Nu 10.62 (12 percent). Diesel is currently priced at Nu 100.59 and petrol at Nu 95.2 in Thimphu.
Although the Road Safety and Transport Authority (RSTA) did not officially increase the fare rate, however, passengers have come across taxi drivers charging higher fares.
Likewise, construction firms are already experiencing an increase in transportation charges and goods.
Economic Affairs Minister Loknath Sharma said the high inflation rate in the fuel price in the market is due to the price hike from the source, which is further exacerbated by the COVID-19 pandemic and various restrictions related to it.
“The inflation will definitely have an impact, and in a study done by the Royal Monetary Authority (RMA), it says that if the fuel price is increased by 10 percent then there will be an immediate inflationary pressure by 3.2 percent. And within three months, the inflation rate will go up to 5 percent after further inflation by around 1.6 percent,” Lyonpo Loknath Sharma said.
He added that the fuel price is an important component of the operation cost of freight transportation vehicles, like truck, thereby, increasing the cost of raw materials, export of industrials goods and commodities, which include the price of goods and services.
Though the monitoring of commodity pricing is a daily routine for the Office of Consumer Protection (OCP), however, there is nothing that OCP can do when it comes to transportation charges.
Lyonpo said OCP is monitoring to check if any shop is charging beyond the price limit, as no one should pay beyond the limit.
The ministry does not control or regulate the taxi fare rate, as it is done by RSTA in a cautious way to make sure there is no exorbitant fare increase.
“There is a standard formula which will allow the increase in fare. I believe RSTA will take care of it. However, given various pandemic situations, there will be people who will take advantage of the situation, which I think is not right to do as everyone is suffering at this juncture,” Lyonpo said.
The ministry advised the business entities to stock up on more goods even before the fuel inflation, and thereby, the business entities should not be charging extra to sell the goods to the customers.
“For now, we are observing the price of the crude oil and we are seeing that it is slowly decreasing, whereby the price stands at USD 120 to 114 per barrel. Our expectation is that the price might come down a little bit.”
The ministry has suggested a few measures or immediate intervention to help the country’s economy.
An official from RSTA said, “We have not revised the (transportation) fare due to the inflation in fuel price. The change in fuel price is erratic, and if we keep changing as per the change that would cause an administrative burden, and that won’t be a smart strategy as well.”
RSTA conducts a bi-annual revision of the fare, and only if the cumulative average is beyond the buffer range, they then revise the fare. Otherwise, it is not feasible to revise each and every time the fuel price changes, he added.
Meanwhile, a truck owner Tashi Dorji said that the transportation charges for the past two years has increased drastically due to various situation caused by the pandemic. Driver switching mode was one factor to increase in charges, as they had to employe two drivers for each truck, he said.
He said, “Now the fuel price has added to a further increase in transportation charges. Before, we used to transport the goods at Nu 20,000 for 12 metric ton (MT), but now it is not feasible at that rate because as per our calculation, we should charge them Nu 24,000 for 12 MT.”
However, it is difficult for the truck transportation owners to convince the consumers to accept the new rate, but there is a room for negotiation to favor both sides, he added.
Contractors have also claimed that everything is becoming costlier, starting from transportation charges to machine charges to procuring raw materials.
“Situation is getting worse each day, and we would be grateful if government could intervene and look for a way out,” they said.
Talking to a few of the business entities, some agreed to have increased the goods pricing, as everything they brought is a new stock with changes in transportation charges after inflation in fuel price. On the other hand, some of them denied increasing the price as they are still selling the old stock of goods.
A few of the taxi drivers said that it is hard to earn a living these days.
“We, as a whole, did not increase the fare, but there might be a few who must be over charging and taking advantage of the situation. However, if this goes on, we would expect RSTA and the government to consider the fare increase, as earning a living has become difficult and we cannot afford to operate the business on a loss,” said a few of the concerned taxi drivers in Thimphu.
