The prices of fuel oil will not be reduced in the next three years in Bangladesh even if the lower price of petroleum products sustain in the international market during this time, officials of the state-owned Bangladesh Petroleum Corporation have said.
They assume that if the government does not transform the BPC’s Tk26,350 crore loan into subsidy, it would need at least three years to pay off that amount, provided that the oil prices remain the same in the international market.
The BPC is now making around Tk8,000-9,000 crore profit per year by procuring oil at low prices and selling those at higher rates in the domestic market.
Prime Minister Sheikh Hasina has also made it clear that her government would not cut oil prices soon despite calls from different quarters.
“The prices will be reduced, if necessary, after the BPC repays its loans and clears its dues,” she told parliament on Wednesday, adding that the BPC was yet to pay back about Tk15,000-16,000 crore it had borrowed to subsidise petroleum sales.
The BPC had adjusted oil prices upwards in 2013 when the rate of the commodity per barrel rose to $122 in the international market. It fixed per litre octane price at Tk99, petrol at Tk96 and diesel at Tk68 at the time.
The state-owned enterprise has been maintaining the same prices though the oil price dropped to less than $40 a barrel globally in last two years.
Prof Dr Badrul Imam, teacher of geology department at Dhaka University, observed that the government should at least reduce the price of furnace oil.
“If the price of furnace oil is reduced, then the government does not need to increase the price of electricity as per the proposal of the electricity distribution companies,” he told the Dhaka Tribune.
Prof Badrul also mentioned that the government’s claims that price cut in other petroleum products bring little or no benefit for the consumers is somewhat true.
BPC Chairman AM Badruddoza, however, said that it would not be possible to cut oil prices since the international market is volatile.
He told the Dhaka Tribune that they had already urged the government to transform the Tk26,349.81 crore loan into subsidy. A letter signed by the BPC chairman was sent to the secretary of the Finance Division on February 1.
The BPC incurred loss from 2007-08 fiscal to 2014-15 because of selling oil in government-fixed low prices in comparison with the international price. The government through the Finance Ministry provided the BPC a total of Tk26,349.81 crore at 3% and 5% interest to purchase the oil.
Since June 2014, the BPC has been making a whopping profit of Tk26-35 per litre on petroleum products on the back of the sliding global oil prices.
A report of the Power, Energy and Mineral Resources Ministry submitted to the Parliamentary Standing Committee earlier this month said that the BPC had earned over Tk11,078 crore from November 2014 until January this year.
Of the amount, Tk7,000 crore was used to pay the dues and to acquire land for the second unit of Eastern Refinery.
At present, the BPC imports about 1.2 million tonnes of crude oil and 4.2 million tonnes of refined oil from abroad while around 300,000 tonnes of petroleum products are received from different gas fields and private fractionation plants.
Crude oil is processed only in the Eastern Refinery to produce diesel, petrol, octane, furnace oil and LPG.
On the other hand, top oil exporters Russia, Saudi Arabia, Qatar and Venezuela agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.
Oil ministers of the countries announced the proposal after a previously undisclosed meeting in Doha – their highest-level discussion in months on joint action to tackle a growing oversupply of crude and help prices recover from their lowest levels in more than a decade. Iran on Wednesday snubbed the proposal and expressed determination to raise production.
Oil market analysts and banks including Goldman Sachs and Barclays say that the planned efforts by the exporters would have little impact on the oil market.
