By Chittaranjan de Silva
Responding to the recent price escalation in diesel, gas, bus fares, consumer goods and likely electricity and water rates, UNP’s Dr. Karunasena Kodituwakku said that the government should tell the truth about the economy rather than ‘trying to paint a rosy picture to the people’.

Dr. Kodituwakku said that Lankans who have just celebrated the new year would start to "feel the pinch of the rising cost of living at the end of January."

Industrialists in the garments sector, the leading export industry also expressed the same view. They said that the garments manufacturing companies which employ workers in large numbers, feared that workers would demand wage hikes due to the spiralling cost of living. According to them, a wage hike and a probable increase in electricity rates would increase the cost of production, which would make it difficult for them to compete in the world market.

Though the crude oil prices increased to above $32 in October last year, today the prices in the world market have dropped by almost 30% to around $24 per barrel, economists said. They said that the latest 15% hike in diesel in December had occurred when the price of crude oil in the world market had declined.

The December hike in diesel was the fourth time after the government increased its price last year.

According to Dr. Kodituwakku, the price of diesel plays a key role in determining the prices of a series of other items.

Factors such as increasing price of diesel and the depreciation of the rupee are factors which give rise to inflation, Dr. Kodituwakku said.

During the UNP regime, the price of diesel was subsidised and kept low. In 1994 when the UNP handed over reins to the PA, the price of diesel was around Rs.11.50 per litre he said adding that the price of diesel today was Rs.24.50.

After the diesel price was increased last December, bus fares were increased by 15%. Private bus operators, who had grudgingly accepted the Transport Ministry’s offer of a 15% hike had said that in addition to diesel, the cost of spares and operational charges too have increased.

According to economists, the increase in electricity rates are inevitable after diesel price hikes, because 50% of the country’s electricity is generated thermally. The Water Board earlier said that it would increase the water rates by 20% this year as the supply of water is also dependent on electricity. According to the Water Board, rates have not been revised in four years.

The price increase in LP gas has also had its effects with most boutiques increasing the price of cooked foods by 50 cents to Re.1.

The price of a domestic gas cylinder, which has gone up to Rs. 509 has caused the less affluent to revert to firewood for cooking.

According to economists, increasing use of firewood is a threat to the country’s forest and also to the wild life which is dependent on the forests.

Keeping the price of diesel low is important for many reasons, they added.