Fuel price hike: Exporters cannot pass the ball

With a further rise in input costs as a result of the fuel price hike, exporters are now worried over finding ways to ride out this added pressure on businesses and retain their competitive edge in the global market.

From commodity suppliers to service providers, all are just passing the additional cost, stemming from fuel price hike, on to end-users, but exporters are having to absorb it to stay competitive in the global market.

Such a cost raising spree of various sectors up to 30% at their whims with no apparent regulation to rein them in, apparel exporters fear it will translate into at least a 5% rise in their production cost, which will eventually eat into their profit margins that are already low or zero for many.

They will have to take a hit from a 10%-30% increase in container handling charges, transport costs and jet fuel price. Besides, a 10% rise in commodity prices will also deal them quite a blow too, because it will affect workers, forcing them to demand a salary hike, they add.

RMG exporters now have no scope to adjust prices as per their previous commitments to buyers, Fazlee Shamim Ehsan, vice-president at Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard.

"We received work orders three-six months ago and in some cases, factories have booked orders for the next four to six months. So, at least for the next 10 months, we cannot ask for price readjustments because of our existing commitments," he said.

Bangladesh has become the second largest apparel exporter as it always sticks to meeting commitments, said Ehsan.

He put rising prices of everything, from yarns to fabrics to accessories to dyes-chemicals, down to a price rise in petrochemicals.

Md Shahidullah Azim, vice-president at Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS, "In the wake of a hike in diesel and kerosene prices, all are in a race to increase their charges or fares, even some are going for an illogical hike ranging between 23% and 30%."

The apparel exporters, who are already under strain with rising yarn prices and shipping costs,  have missed out around $750 million in exports over the last six days because of the truck and covered van strike, Shahidullah added.

Yarn prices have increased to $4.8 per kg from $2.4 per kg in a year, while shipping costs registered a 300% rise, according to him.

Private ICDs raise handling charges by 23%

Bangladesh Inland Container Depots Association has increased container handling and transport charges by Tk2,089-Tk2,605, citing increase in other export-import costs following the recent fuel price hike.

As per the new tariffs, the transport charge for a 20-foot container (between the port and depot) has been increased to Tk1,415 from Tk1,150. Haulage charge for a 40-foot container has been hiked from Tk2,300 to Tk2,830.

The owners of 19 private inland container depots (ICDs) in Chattogram – following a virtual meeting on Tuesday – issued a circular announcing the new rates of five service charges with retrospective effect from 4 November.

"The cost of vehicles and equipment management of the private off-docks have increased following the price hike of diesel and kerosene.

"Therefore, the additional charges have been imposed to cover the additional fuel costs," Nurul Qayyum Khan, president of the association, told TBS on Wednesday.

Bangladesh Freight Forwarder Association and the BGMEA have termed the move "illogical" as it will exponentially increase import-export costs.

"The hike in handling charges is another burden for us because our profit margin is very low as we depend on raw material imports," SM Khaled, managing director at Snowtex Group, a leading jacket maker. 

Expressing frustration over the sudden decision, Chattogram-based Clifton Group CEO and Director MDM Mohiuddin Chowdhury, said, "Costs are growing uncontrollably. The situation is becoming very difficult. This [tariff hike] is the ultimate blow to our business."

"This trend is evident everywhere. The cost of doing business is seeing a constant rise. Who will control who?"

"I do not see any hope for this situation to be brought under control," he added.

When contacted, Bangladesh Freight Forwarders Association Vice President Khairul Alam Sujan said, "Bangladesh Inland Container Depots Association hiked the charges without consulting anyone. Exporters will suffer the most because of it."

BGMEA Vice-President Rakibul Alam Chowdhury, "This move has pushed the country's RMG sector towards a new crisis. It is illogical to increase charges during such difficult times."

"We demand immediate withdrawal of the hiked service charges."

Truck and covered-van owners want a 30% fare hike

Rustom Ali Khan, convener of Bangladesh Truck, Covered Van, Tank Lorry, Prime Mover Owners and Workers Coordination Council  told The Business Standard, "We want at least a 30% fare hike as everyone has increased their charges and fares."

The truck and covered-van owners will sit with the BGMEA and the BKMEA by next Monday, he added.

On the other hand, the Bangladesh Cargo Vessel Owners Association and the Water Transport Cell (WTC) are still in talks over  fixing  fares of lighter ships.

Nurul Haque, general secretary at the cargo vessel owners association, said they will adjust fares in keeping with the fuel price hike as lighter ships transport only industrial raw materials and commodities.

Transport costs of local commodities increases over 10%

Truck owners have already increased over 10% of transportation costs of local commodities on different routes in the country owing to the fuel price rise.

Jahangir Alam, president of the Chaktai-Khatunganj warehouse general business welfare association, said generally, a truck fare has increased to Tk26,000 from Tk 24,000 to carry 13 tonnes of goods from Benapole to Khatunganj.

Prices of consumer goods  will increase  by 10%

Claiming that the latest fuel price hike will increase their cost by at least 25%, consumer goods and home appliance traders say prices will go up by 10%.

Kamruzzaman Kamal, marketing director at PRAN-RFL Group,  said, "Our business will be costlier owing to the fuel price hike, which will lead to a rise in raw material prices and production costs. Transportation costs will increase by up to 30% as well."

The group may increase the retail price of goods up to 10%, which is very nominal, he added.

Biswajit Saha, executive director at City Group, one of the largest consumer goods traders, said they have to increase retail prices for their survival.

Jet fuel increases by 57% in a year

Mofizur Rahman, managing director at Novo Air Ltd, said aviation fuel price has increased by Tk18 in the last two and half months; it has to be adjusted with airfare as fuel price accounts for 40% of aviation operation costs.

Kamrul Islam, general manager at Marketing Support and Public Relations at US-Bangla Airlines Ltd, said jet fuel price increased by 57%, registering a hike  in nine phases in between September last year and November this year. Airlines have no option but to adjust the additional cost.

"Since 5 November,  jet fuel price per liter has increased to Tk77 per litre, but we have not adjusted that yet," he added.