Fuel Price Hikes and Their Potential Impact on Agriculture

Agriculture, the lifeblood of Bangladesh’s economy, is facing mounting pressure. On one hand, farmers are struggling with fertiliser crisis; on the other, they are now confronted with another increase in fuel prices. Repeated increases in the cost of agricultural inputs are pushing production expenses to a level where making a reasonable profit from farming is becoming increasingly difficult. On September 20, the government raised the prices of diesel, petrol, octane and kerosene by Tk20 per litre. The new prices are Tk135 for diesel, Tk155 for kerosene, Tk160 for petrol and Tk165 for octane, compared with Tk115, Tk135, Tk140 and Tk145 respectively. The government has attributed the latest increase to higher international fuel prices and transportation costs amid the ongoing conflict in the Middle East.

This is not an isolated adjustment. It is the third fuel price increase this year. Earlier, on April 19, diesel, kerosene, petrol and octane prices were raised by Tk15, Tk18, Tk19 and Tk20 per litre respectively. From June 1, the prices of octane, petrol and kerosene were increased by another Tk5 per litre. As a result of these successive adjustments, the price of diesel has increased by about 17.4 per cent within just a few months. Diesel is particularly important to Bangladesh’s agricultural and transport systems. Irrigation, land preparation, harvesting, threshing and transportation all depend heavily on diesel-powered machinery. In an agriculture-dependent country, any significant increase in diesel prices therefore has direct implications for production costs and, ultimately, food security.

Higher fuel prices increase the cost of transporting agricultural products from farms to markets, which can push up retail prices of food and other essential commodities. Thus, a rise in fuel prices can trigger a chain reaction: higher production costs, lower farm profitability, increased food prices and, ultimately, greater pressure on household budgets and national food security.

Past experience shows that increases in diesel prices can raise farmers’ irrigation expenses by several hundred takas per bigha, while the cumulative additional burden at the national level can run into thousands of crores of taka. Following the April 2026 price increase, agricultural economists warned that the additional diesel-related costs alone could push farmers’ overall expenses up by more than Tk1,500 crore.

The impact, however, extends far beyond irrigation. Diesel-powered machinery is used for land preparation, harvesting, threshing, processing and transporting agricultural produce. Farmers and agricultural experts in the Rajshahi region, for example, have estimated that production costs could rise by as much as 30 per cent because diesel is used at almost every stage of cultivation. The situation is already being felt at the farm level. Operators of shallow tube-wells say they have little choice but to increase irrigation charges as soon as fuel prices rise. Otherwise, operating the pumps at the previous rate becomes financially unviable. At the same time, farmers are facing higher costs for fertiliser, seed, pesticides and labour.

The result is a widening gap between production costs and farm-gate prices. When farmers cannot obtain a fair price for their produce, their profit margins shrink or disappear altogether. The burden is particularly severe for marginal farmers and sharecroppers, who have limited financial capacity to absorb additional costs. There is also a growing disparity between farmers who use diesel-powered irrigation systems and those who have access to electric irrigation. If this disparity continues to widen, it could create further inequality within the agricultural sector.
 Rising production costs do not affect farmers alone. The consequences eventually reach consumers. Higher fuel prices increase the cost of transporting agricultural products from farms to markets, which can push up retail prices of food and other essential commodities. Thus, a rise in fuel prices can trigger a chain reaction: higher production costs, lower farm profitability, increased food prices and, ultimately, greater pressure on household budgets and national food security.

Although fuel prices are influenced by international market conditions, protecting agriculture from excessive shocks should remain a policy priority. Otherwise, repeated fuel price increases could become not only a financial burden for farmers but also a broader threat to food security and rural economic stability. Several measures are therefore urgently needed.

First, the government should expand irrigation subsidies and consider a separate subsidised price or card-based allocation system for diesel used specifically in agricultural irrigation. This would help shield farmers from sudden increases in market prices. Second, incentives for solar-powered irrigation pumps and electric deep tube-wells should be increased. A gradual transition from diesel to renewable and electricity-based irrigation would reduce farmers’ exposure to fuel price volatility while supporting cleaner agricultural production. Third, government procurement prices should be reviewed in line with rising production costs so that farmers receive a fair return for their produce. Procurement policies should be based on realistic assessments of current input and production costs. Fourth, authorities should closely monitor food markets to ensure that transportation costs are not being used as an excuse for unjustified increases in food prices. Finally, affordable agricultural credit and crop insurance should be expanded for marginal farmers and sharecroppers. Such measures would strengthen their capacity to withstand sudden increases in production costs and other economic shocks.