Kerosene prices rose again in Bangladesh to Tk 106 after the Padma Oil Company, a subsidiary of Bangladesh Petroleum Corporation (BPC), hiked it by Tk 6 per litre.
Therefore, air travel will inevitably cost more, as fuel accounts for around 40% of an airline’s total operating cost.
Industry insiders have warned that the decision will rattle the domestic aviation industry unless the government takes steps to reduce jet fuel prices or has alternative plans in place.
Jet fuel prices have so far been increased 15 times in the past 18 months.
Jet fuel prices are reviewed monthly, based on the average price of the international benchmark, particularly the Indian jet fuel market (Kolkata), BPC officials said.
The new jet fuel price list was updated on May 14 and has been in effect since May 15.
According to BPC, jet fuel costs Tk 106 per liter for domestic flights and the international price of jet fuel is $1.09 per litre. It was $1.02 per liter in April.
Meanwhile, CNN-News18 reported that the Indian Oil Corporation (IOC) announced a 5% hike in jet fuel prices to Rs 1.23 lakh per kiloliter in Delhi.
Leaders of recruitment agency Oikya Parishad and Bangladesh Association of International Recruitment Agents (BAIRA) have complained that BPC has frequently raised fuel prices only citing the ongoing war between Ukraine and Russia .
Jet fuel prices ended down 5.6% at $166.4/bbl (US dollars per barrel) last week, according to the International Air Transport Association (IATA).
Will the prices of plane tickets also go up?
Officials from Biman Bangladesh Airlines, US-Bangla and NOVOAIR said jet fuel prices had risen by more than 130% in the past year and a half.
They said it was a blow to Bangladesh’s aviation industry and passengers should pay the ultimate price.
The contribution of the aviation and tourism sector represents about 3% of the country’s total GDP, which could increase under proper control, they said.
Kamrul Islam, managing director of public relations at US-Bangla Airlines, said: “If the government fails to control jet fuel prices, domestic airlines will suffer financially and lose their position in the aviation market.”
Lal Hossain, secretary of the BPC, said: “The government does not offer any subsidies for jet fuel. The committee responsible for fuel prices has raised the price of jet fuel, citing high import costs. Comparing with the market in Kolkata, the price of kerosene here is much lower.
Reflecting on the situation, ATM aviation expert Nazrul Islam told the Dhaka Tribune that unless the war in Ukraine ends, the price of jet fuel will not come down.
The situation has created dark skies for two upcoming domestic airlines – Fly Dhaka and Air Astra.
Kazi Wahidul Alam, another aviation specialist and former board member of Bangladesh Biman, believes that the situation can be controlled if the government reduces VAT (value added tax) by 50% on the price of kerosene.
The government already collects taxes on air passenger fares, he added.
The Bangladesh Air Operators Association said the minimum fare on domestic routes was Tk 3,200 in January last year but has been reduced from Tk 3,500 to Tk 4,500 due to the continued increase in jet fuel prices.
He estimates that air fares could increase by at least Tk 500 to Tk 600 or more per passenger on domestic routes due to the latest price hike.