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Fuel price readjustment possibility under review
S M Jahangir
1/23/2006
The Energy Division under the Ministry of Energy, Power and Mineral Resources (MEPMR) is examining the possibility of a further hike in the prices of petroleum products.
The unabated rise in the prices of fuel oils in the international market and the galloping losses of the state-owned Bangladesh Petroleum Corporation (BPC) have forced the division to float the proposal for price hike.
Besides, the World Bank has also asked the government to adjust oil prices in line with the international market, official sources said.
The Energy Division is going to discuss the price readjustment issue with the line ministries and bulk consumers of petroleum oils shortly, a top-ranking official told the FE.
Expressing his concern over the sustained rise in the oil prices in global market, Energy Advisor Mahmudur Rahman said, "The ministry will sit with the concerned government agencies to discuss the possibility of the prices readjustments."
He further said, "The decision on the price hike of oil prices is yet to be finalised … We may have to increase the oil prices to cope with the ever-growing financial losses due to their marketing at the rates below the import cost."
Through the government has been able to reduce the volume of oil import through checking of its smuggling, it is not enough to offset the financial losses, said the Advisor.
The financial loss to be suffered by the BPC has been estimated Tk 20 billion this year due to the current price spiral of oil prices in the international market, he noted.
Quoting the latest international price, he said, crude oils are being sold at US$ 67 per barrel. The price was as low as $ 45 per barrel several months back. Such an increase has pushed the BPC's cost of oil import significantly up.
Official figures showed the BPC will require around $ 2000 million for import of petroleum oils this financial year compared to $ 1500 million in the fiscal 2004-05 and $ 1000 million in the fiscal 2003-04.
The government is facing immense crisis to meet the cost for oil import.
It has already sought foreign currency from the central bank and two other foreign commercial banks after the state-run commercial banks concerned declined to open letters of credit (LCs) for oil import, according to sources.
They, however, said the government has no other option but to enhance the oil prices to cope its sustained financial losses.
MEPMR officials indicated that the BPC was likely to bear an additional cost, as the Kuwait Petroleum Corporation (KPC) has demanded higher premium rates of its products under the revised purchase deal for the January-June period.
According to proposed new rates, the BPC would require to pay an extra Tk 494.80 million to the KPC for imploring oils during the period, the mentioned.
The government is negotiating with the KPC to keep the premium oil prices at the existing levels, they mentioned.
A section of officials, on the other hand, said the government is in a great dilemma over the further enhancement of oil prices with the general elections nearing.
The present government has so far raised oil prices eight times with its latest hike took place in last September.
In the latest enhancement, the prices of gasoline rose up 17 per cent on an average as the price of petrol increased from Tk 36 to Tk 42 per litre, diesel and kerosene from Tk 26 to Tk 30 per litre and octane from Tk 38 to Tk 45 per litre.
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