Huge hike in diesel price to cause inflation

May 01, 2014 - 2:05:31 am
Ahmed Al Khalaf.

DOHA: The increase in diesel prices will have a spillover effect and mount inflationary pressures as commodities and construction materials would become more expensive, businessmen warned yesterday.

Heavily reliant on diesel, the transport industry is sure to pass on the extra burden to the end-user, said prominent businessman Ahmed Al Khalaf.

A construction industry insider said the announcement of 50 percent hike in diesel prices (to QR1.50 from QR1 per litre) came in as a rude shock for the entire industry.

“Our costs will go up and this would have a chain reaction. We use diesel in almost every equipment, be it our buses, trucks, trailers or earth-movers,” said the insider.

Cranes, forklifts, wheel-loaders, trailers, bulldozers, excavators and drilling and other heavy machineries are all fired by diesel, he said. “We take trailers on hire to transport cement, for instance. Now trailer operators will increase their rates, from QR1.2 per bag to maybe QR2 per bag,” said the insider.  “This is just one example.” 

Al Khalaf said the rise in diesel rates will negatively impact the ongoing infrastructure projects.  “What happens to the construction contracts for mega projects that have already been signed based on diesel price of QR1 per litre,” Al Khalaf said in remarks to this newspaper.

Such an increase was not expected. “The government should step forward and compensate construction contractors who have already signed contracts,” he said. Increasing diesel price by 50 percent is just too much, added Al Khalaf. 

The construction industry insider said that a little more than three years ago, diesel was 70 dirhams per liter.

“This is more than 100 percent increase since January 2011. This is too much.” The common man is going to be directly affected by the hike in diesel rates as it is a very essential fuel and used widely in transport and construction industries, said Al Khalaf.

It is significant to note that fuel is clubbed with rent and energy in the consumer price index (CPI) basket and has a 32.2 percent weight, nearly a third.

Rents have already been spiraling and now it is diesel. The double impact is sure to push the rate of inflation up. Last March, for instance, this group (rent and fuel) witnessed a rise of 5.7 percent, the highest among all the groups, with overall inflation being 2.6 percent.

The Peninsula

 

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