VOL NO REGD NO DA 1589

Tuesday, January 24, 2006

HEADLINE

POLITICS & POLICIES

METRO & COUNTRY

MISCELLANY

EDITORIAL

LETTER TO EDITOR

COMPANY & FINANCE

BUSINESS & FINANCE

TRADE/ECONOMY

LEISURE & ENTERTAINMENT

MARKET & COMMODITIES

SPORTS

WORLD

 

FE Specials

FE Education

Urban Property

Monthly Roundup

Saturday Feature

Asia/South Asia

 

Feature

13th SAARC SUMMIT DHAKA-2005

National Day of Australia

57th Republic Day of India

US TRADE SHOW

 

 

 

Archive

Site Search

 

HOME

EDITORIAL
 
The fuel price dilemma
1/24/2006
 

          THE energy division under the ministry of power, energy and mineral resources, practically, is in a catch 22 situation; while the import cost of petroleum products has been soaring unabatedly, it cannot -- even if it wants to -- make necessary adjustments outright in domestic prices of the same for a variety of reasons. In fact, the rising cost of fuel imports has given rise to a number of distortions of serious nature in the economy; it has put the balance of payments situation under pressure and created serious strains on the financial health of the state-run Bangladesh Petroleum Corporation (BPC).
The situation can be well understood from the costs of imports of petroleum products mentioned in a FE report that was published Monday. According to the report, the imported petroleum products had cost the country $1.0 billion in the fiscal year (FY) 2003-04. In the following fiscal the cost increased to $1.5 billion. During the current fiscal, the expenditure on this head is estimated at $2.0 billion. The government had raised the prices of petroleum products in the domestic market over the last two years, the latest being in September last. But the increase was inadequate to match the import parity prices. The predicament of the BPC can also be guessed well from its projected financial loss -- Tk 20 billion -- during the current financial year. Such an estimate may also prove wrong as the crisis over the Iranian nuclear issue has created yet another volatile situation in the international oil market. The ruling price of a barrel of oil in the international market is now around $67 and it may reach a new height if the supply of Iranian oil, for any reason, fails to reach the international market.
Meanwhile, as if to make things worse, the public sector banks, which have been hitherto extending loan facilities for fuel imports by the BPC, have refused to open letters of credit (LCs) for the BPC. The banks, actually, are now left with no other option since the BPC that owes to the banks more than Tk 50 billion has failed to service its debts, even partially. The government, under the circumstances, has been forced to seek loans from foreign commercial banks to finance oil imports. In such a situation, the energy ministry, the FE report said, is examining the possibility of making upward adjustments in fuel prices. Since the issue is sensitive, in terms of its implications on domestic price situation, agricultural production and exports, the government has to think twice before taking any decision.
With next general elections remaining not far away, any proposal for fuel price-hike has the potential of facing opposition from within the ruling party circles. Their minds are now focused on the ballot boxes, not on economic developments. But can the economy sustain such staggering losses on account of fuel imports? Everyone has to consider the issue rationally. The decision makers do also need to take into consideration the possible impact of price-hike of diesel on agricultural production during the current Rabi crop season. At the same time, the plight of the BPC cannot be overlooked. It has a huge bank debt and this likely to be compounded over time because of interest charges. This is a direct liability for the national exchequer which has to be ultimately addressed by the government and none else. The petroleum price situation has been a troublesome issue that has unsettled many plans of the government and created serious worries for it. The policymakers have to chart out its right course very skillfully. It cannot just go for any populist decision at the cost of the economy.

 

 
  More Headline
The fuel price dilemma
The rich and their war on poverty
Concern grows over 'no-strings' debt relief
Terror attacks on Indonesia's Bali island sour outlook for tourism
 

Print this page | Mail this page | Save this page | Make this page my home page

About us  |  Contact us  |  Editor's panel  |  Career opportunity | Web Mail

 

 

 

 

Copy right @ financialexpress.com