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BPC wants extra profit in new fuel pricing model

Sep 8, 2023

| Ashraful Islam Raana | The Business Post

Bangladesh Petroleum Corporation (BPC), the country’s major fuel oil importer which is making a policy in this regard, wants to make an additional profit of Tk 10 per litre in the new model. However, BPC has doubts whether this system will be effective by September or not. BPC Director Khalid Ahmed said, “Our effort was to implement the new model within the stipulated time. Nevertheless, some complications arise regularly causing delay.” But this time, the announcement may come soon, he said.


BPC sources said State Minister for Power, Energy and Mineral Resources Nasrul Hamid is not in favour of the BPC’s proposal. Consumers Association of Bangladesh (CAB) Senior Vice President Professor M Shamsul Alam said according to the regulation, BPC has no legal right to fix fuel oil prices as it is a seller. Bangladesh Energy Regulatory Commission (BERC) is supposed to fix the price to protect public interests, he said. Earlier, the government announced withdrawing subsidies from the power and energy sector to reduce pressure on the national economy. Experts said that such a condition emerged as the country was burdened with a $4.7 billion loan provided by the International Monetary Fund (IMF), although the government never admitted that.


Government’s explanation

The authorities explained that consumers and the state will benefit if the price of fuel oil can be adjusted with international oil flagships like West Texas Intermediate (WTI), Brent and Murban. In this model, the prices of import-based diesel, petrol, octane, jet fuel and other petroleum products will fluctuate in the domestic market as per the international market price. Nasrul Hamid had announced that the rates would be adjusted every three months on an experimental basis. At present, the procedure for determining fuel oil prices is in force by the executive order.



BPC’s role in making the policy

A high-level team of BPC earlier visited India after the Ministry of Power, Energy and Mineral Resources asked BPC to prepare a policy in this regard, according to sources. Apart from this, in an inter-ministerial meeting later, it was decided to bring the issue of fuel oil pricing under BERC. Meanwhile, BPC has been active in controlling the fuel oil prices since the beginning. Accordingly, BPC developed a draft model for determining oil prices and presented it in a closed-door meeting, recently which suggested Tk 10 profit per litre for BPC. Nasrul Hamid who was present at the meeting expressed concern about the BPC proposal, according to BPC sources. The state minister directed BPC to review the policy, stating that, the fuel pricing model should not only protect the interests of BPC but also secure the consumers' benefits.


Challenges of following global rates

A senior BPC official, speaking on condition of anonymity, told The Business Post that depending on the international market for fuel prices can trigger many challenges. For example, prices of diesel, which is widely used by the common people, are always higher in the international market. But in Bangladesh, it is reversed while petrol-octane prices are kept high for comparable luxury brands. Later, the diesel price is adjusted with that to keep the prices reachable to the general consumers, he stated. In August 2022, the fuel oil price was increased by more than 40 per cent by an executive order. Currently, per litre octane is Tk 130, petrol is Tk 125. BPC has said that once the international rate comes into effect, octane per liter will come down below Tk 100. But the diesel price may hit Tk 110. The government is thinking of keeping the octane-petrol prices high to keep diesel prices bearable as there will be no subsidy on the overall oil prices. Apart from this, BPC officials also stated that the prices will be kept in line with the Indian market so that it can’t be smuggled into India.


Impact of the tax hike

Meanwhile, BPC officials said the new tax system has created some hurdles in the new model for determining fuel oil prices. Recently, the National Board of Revenue (NBR) issued instructions for the payment of revenue based on Commercial Envoys at the import level. So far, BPC has been paying revenue according to their formula but the new formula of NBR has increased the tax amount which may affect the overall prices. Last week, Nasrul Hamid told the media that the new model has not been finalised yet, and NBR seeks duty on a commercial envoy basis. The prices may go up if the duty is adjusted and the government does not want to burden the public with additional prices at this time.



News Link: BPC wants extra profit in new fuel pricing model

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