BPC proposes automated oil pricing system

Bangladesh Petroleum Corporation (BPC) has proposed that an automated oil pricing system be introduced in Bangladesh, allowing oil prices to be adjusted accordingly based on international market rates. According to a high ranking official of BPC, a specific system is used in the international market for setting oil prices. As a company loads oil into a cargo ship, it sets its prices based on rates published on Singapore based magazine Platts. The oil prices in the international market changes every day and the BPC purchases oil on an ever changing rate. The BPC official added: “The ever changing oil prices in the international market do not affect rates in Bangladesh to a big extent. The oil prices in the country were last changed in April, 2016.” However, the BPC currently wants that oil prices in Bangladesh be changed according to the international market. The correspondent has learned that the oil prices in India are changed at a regular interval, in accordance with the international market rates. A number of other countries, including Pakistan also follow this system. Due to the recent upward trend in oil prices in the international market, the BPC has proposed to the Bangladesh government that the current system of setting oil prices be changed.

At the moment, Energy and Mineral Resources Division sets the oil prices in the countryPhoto: Dhaka Tribune

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At the moment, Energy and Mineral Resources Division sets the oil prices in Bangladesh. The division issues gazettes for setting new prices, under approval of the prime minister and by orders of the president. Despite being responsible for setting oil prices, Bangladesh Energy Regulatory Commission (BERC) has only set them once. It is almost always done by the Power Division authorities.

BPC’s point of view

Speaking on the matter, BPC Director (Marketing) Mir Ali Reza said: “We are working on a formula, which will allow us to automatically adjust the oil prices in Bangladesh, according to changes in international market rates. The prices will be readjusted every month.” He added: “If the formula is implemented successfully, a lot of hassle relating to frequently changing oil prices in international market can be avoided. The system will also save the BPC from more losses.” Reza pointed out that the BPC is suffering a loss of Tk10 crore every day.According to BPC sources, the corporation has suffered consecutive losses from 2001 to 2014. The government was then subsidizing the sector to cover its losses. The BPC started to gain profit from 2014. Later, the government decided not to subsidize this sector any more. M Tamim, a professor of Bangladesh University of Engineering and Technology (Buet) and also an energy expert, said: “The BPC is talking about adjusting oil prices with the international market as the rates increased but it did not make this proposal when the oil prices were relatively low.” Prof Tamim, however, added: “The system, if implemented, will be good for this sector. It would automatically adjust the oil prices with the international market. But, it is imperative that the public is properly informed about this system.” He opined that the BPC should provide a cost breakdown of oil prices to the consumers, mentions expenses such as transportation and taxes. The BPC has fixed prices of Kerosene and Diesel at Tk65 per litre and furnace oil at Tk42 per litre. In a letter recently sent to the Energy Division, the BPC proposed a price hike of Tk11 for Kerosene, Tk7 for Diesel and Tk13 for furnace oil. The corporation stated that the price hike has been proposed to cover its losses arising from the oil price increase in the international market.This article was first published on banglatribune.com