The recent surge in fuel prices is causing a ripple effect in the logistics industry. Following the government’s increase in prices of major petroleum products, including diesel, by Tk 20 per liter on September 20, private inland container depot (ICD) owners have raised container-handling charges by 9.85 percent. Berth operators are seeking adjustments to contract rates, while lighter-vessel owners and road transport operators are considering or implementing similar changes. This price hike is raising concerns among exporters about the impact on their competitiveness due to escalating logistics costs.
Diesel plays a crucial role in various operations such as trucks, prime movers, container-handling equipment, and inland vessels. Operators cannot sustain absorbing higher fuel costs indefinitely. However, the question arises whether every fuel price increase should automatically trigger a proportional tariff increase across the entire logistics chain. Perhaps a transparent and proportionate cost adjustment formula directly linking tariff changes to the actual fuel component of the service provided would be more appropriate.
The ongoing debate surrounding the fuel price increase is divided. Some advocate for price stability through government subsidies, while others argue that Bangladesh cannot shield consumers from global energy cost fluctuations indefinitely. Subsidies can mitigate sudden price shocks but strain the budget and foreign exchange reserves. Passing on higher costs to consumers can alleviate these burdens but can also lead to increased transport and production expenses along with inflation.
While different countries adopt varying approaches to fuel price adjustments, what remains crucial for the logistics sector is how a Tk 20 per liter diesel price hike translates into container-handling charges, trucking rates, or lighter-vessel freight rates. The relationship between fuel prices and service costs should be transparent and reasonable.
Recent adjustments in domestic fare rates serve as examples. After the recent fuel price hike, official bus fares increased by about 7 percent per kilometer, while passenger water-transport fares rose by 7.54 percent. Different services have distinct cost structures and levels of fuel exposure, indicating that fuel price changes do not need to directly translate into full-service tariff adjustments. This principle should also apply to the logistics industry.
The key lies in establishing a clear formula. If fuel constitutes 30 percent of the total service cost, a 17.4 percent increase in diesel prices would, on average, raise the overall service cost by about 5.2 percent. The specific coefficients may vary by service type, but the underlying principle remains the same: only the fuel-sensitive portion should fluctuate with fuel prices.
Having a standardized formula for cost adjustments would enhance confidence in the logistics sector. Transparency and predictability are essential for sustainable operations, especially as global fuel markets continue to exhibit volatility. Instituting predetermined escalation and de-escalation clauses for major inputs in future port and logistics tenders can help mitigate uncertainties and ensure fair cost recovery mechanisms.
It is crucial to prevent cost accumulation as the impact of fuel price changes travels through the supply chain. Applying broad percentage increases across all tariff components can amplify the initial energy shock. The goal is not to hinder logistics operators from recovering legitimate additional costs but to ensure that such costs are recuperated in a transparent, proportional, and consistent manner.
While external factors like fuel price fluctuations are beyond our control, we can manage how these shocks affect our domestic logistics system. Implementing a rules-based mechanism rather than ad-hoc negotiations can streamline cost adjustments in response to fuel price fluctuations. By adopting a formula-driven approach, logistics charges can align more effectively with fuel price changes, promoting stability and fairness in the industry.
