Dhaka, Bangladesh (BBN) – The government has hiked fuel prices by a maximum of 19.04 percent a litre to reduce subsidy on imports of petroleum products, officials said.

The new rate will come into effect from 12:01am Monday, officials said, adding that  the price of every litre of furnace oil has been raised by BDT 8.0, while diesel, petrol, octane, and kerosene by BDT 5.0.

Bangladesh increased fuel prices for the second time in more than four months in a move that economists fear will fuel inflation.

Asked about the reason behind the move, Energy Secretary Mesbahuddin Ahmed said the government is counting a huge subsidy on imports of petroleum products as the prices on the international market have recently increased.

The decision will cut the annual subsidy on petroleum products by BDT 35 billion to Tk 145 billion, The Daily Star, a local newspaper, reported quoting the energy secretary.

The secretary, however, said the price hike will have a bad impact on people’s daily spending, but there was no alternative.

Zaid Bakht, research director of Bangladesh Institute of Development Studies, reportedly said the fuel price hike was expected. ”Without price adjustments, there would have been serious budgetary implications,” he said, warning about rising inflation.

Inflation rose to 11.29 percent in August from 10.96 percent in July due to an increase in non-food costs in the face of rising fuel prices, transport fares, clothing prices and household expenses.

Prior to Sunday’s price hike, the government was providing BDT 33.44 subsidy for per litre diesel, BDT 32.49 for kerosene, BDT 8.02 for octane and BDT 12.96 for furnace oil, according to an official statement.

BBN/SSR/AD-19Sept11-10:24 am (BST)