Economists and consumers have been long been demanding that the price of fuel oil be lowered but, after reducing the price once back in 2016, the government has consistently refused to make another reduction. What are your thoughts on this?
Not reducing the price of all types of fuel oil (petrol, octane, diesel, etc) is a shortsighted decision by the government because any sort of price distortion ultimately affects the consumers and the economy. The government simply could not resist the opportunity to collect revenue. There are two aspects to this: First, the high price is causing consumers to spend more on personal transport thus diverting money from other spending and investment; second, it is causing the transportation cost of freight to rise, which can never be good for the economy.
Private oil companies enjoy an import duty waiver on furnace oil. If BPC also enjoyed a similar facility, the electricity companies would get furnace oil at a reduced price. The Power Development Board (PDB) also says if furnace oil prices are lowered, then there will be no need for an electricity price hike. What do you think the government’s stance should be on this?
This is absolutely ridiculous. How can there be two prices for the same product for the same use? In some situations there can be different prices for the same product but for different uses. For example: LPG used in households for cooking may be subsidized, but not for industrial use. By keeping BPC’s price of furnace oil high, the government is causing huge losses for PDB. With international oil prices at historically low levels and with 20% of electricity coming from oil, it is difficult to understand how PDB can run at a loss after having increased electricity prices more than five times to a level double of that in 2010. This is a perfect example of how wrong pricing can distort things.
Furnace oil is an industrial fuel. When there is a shortage of natural gas, industries use furnace oil. By keeping the price of furnace oil high the government is preventing industries from finding the proper solution to their primary energy shortages. That is why industries are forced to illegally buy expensive CNG and transport it in large cylinders to their industries to make up the shortage of natural gas.
When the price of fuel is increased in the international market, the local market price is also hiked. But when the international price drops, the local price remains stagnant. Do you think there could be a new policy in this matter?
Most certainly. This type of ancient pricing exists in only a few backward countries of the world. Even India has moved to a market based pricing. If the international price of oil falls, consumers immediately enjoy the benefit. This type of pricing also relieves the government from shouldering the burden of subsidies when prices become high. Consumers then understand that they have to pay what the real price is. This also keeps the country on par with prices in other countries so that local businesses can also enjoy the benefits of low oil prices and remain competitive.
Very simply, the government should start market based pricing. It is impossible to imagine that prices at the oil pump stations will move up and down as in western countries and that there will be competition amongst retailers, but some form of price adjustment with changing international oil prices is essential. The government is making a big mistake in this regard by not changing the outdated fuel oil pricing system in the country.
Since BPC is a government agency, its focus should not be on making profits. What do you think it can do to break even but still continue to provide services that benefit consumers?
Some benchmark oil prices should be set. As soon as the price of fuel oil goes below or above those benchmark prices, there should be a mechanism of adjustment. Oil prices will remain volatile for a long time to come. Many analysts predict that because of the concerns regarding climate change, the last barrel of oil will not be extracted and long before oil comes to be regarded as a scarce resource, alternatives and renewable energy will replace it. If the fluctuating oil prices are not reflected locally, then business will suffer because the price in Bangladesh will remain high while competing countries will enjoy very low oil prices.
There has been a complete lack of transparency in BPC’s operations, especially as they have continually failed to publish its annual financial report. The government has done nothing about this either. Do you think this makes their providing proper services questionable?
If BPC does not regularly publish their financial reports, consumers will definitely continue to suffer.
A lack of financial accountability means that BPC will never appreciate the problems it is creating and never realise how to correct problems. It is unthinkable that such a large national company does not prepare annual reports. This is a must for all companies - private or public.