Decision to hike fuel prices abrupt, hurried: Experts

The Bangladesh Petroleum Corporation (BPC) has taken the decision to hike fuel prices abruptly and hurriedly without observing the global market situation further and consulting stakeholders, say experts.

The government could have observed the global market for two more months to know whether the surge is stable or temporary as they had not adjusted the fuel prices locally for the last five years.

Zahid Hussain, former lead economist at the World Bank's Dhaka Office, said, "If we look at the global energy market, we will find a justification for the price adjustment in Bangladesh."

"But what is the government policy regarding fuel price adjustment because we did not follow policies like in India where domestic prices are linked with the international price? Indian local fuel prices rise and fall in line with the international market," he also said.

"We do not have that link. In the last few years, especially last year, when fuel prices fell in the global market, we did not see such an adjustment," he noted.

Zahid said in recent times, it seems the government's policy is to increase fuel prices in the local market when the prices go up in the international market.

But when global prices dropped, the BPC did not adjust local prices, citing that they were offsetting losses that had been incurred earlier, he pointed out.

Nobody is sure how long the global fuel market will remain volatile, energy experts and economists predict that it could last six months to 12 months.

"I think the government should have waited till next January to know whether the fuel price surge is stable or temporary as they did not adjust the price for the last five years," said Zahid.

Sources at the Energy Division said the BPC, which imports and supplies fuel in the local market, earned a profit of Tk36,000 crore in the last six years.

Even in the last fiscal year, the state-operated corporation earned around Tk4000 crore, the sources added. 

During the period, the fuel prices dropped even below the negative line, but the prices were not adjusted locally.

Asked about the diesel price hike, ABM Azad, chairman (secretary) at the BPC, told TBS that raising the diesel price is an admistrial decision and also related to the government's policy.

"As per our duty, we provide updated data and documents, and we set out a work plan as per the government's directives," he added.

Defending the recent price hike, Azad said, "Before 2014, the government used to provide subsidies to supply cheaper fuel at home after importing at high costs. But nobody told us to increase the price in the local market."

The corporation can maintain a breakeven if the base price of diesel is below $70 per barrel. But since April the base price of diesel has been above $70 and has now reached $90 per barrel.

The Bangladesh Economic Review 2021 reads that the government had to give Tk28,586 crore in subsidies for importing petroleum products in between FY11 to FY15.

However, the government did not give any subsidy in FY16-FY21 as the oil price has fallen in the international market.

Three reasons behind diesel price hike

Officials at the BPC said the reasons behind the recent diesel price hike in the local market are enhancing money flow into the ongoing projects, and preventing fuel smuggling to India and the global market.

At present, there are some ongoing projects under the BPC, including Eastern Refinery Second Unit, Single Point Mooring and India-Bangladesh Oil Pipeline. The project costs amounted to around Tk30,000 crore and the BPC is providing most of the money from its own fund.

If the corporation incurs losses months after months, the implementation of these projects would face uncertainty, they pointed out.

On the other hand, Bangladesh's fuel prices are much cheaper than that of India. Therefore, the government fears the smuggling of fuel to neighboring India. To stop fuel smuggling in India, the government increased the price in the local market, BPC officials.

Zahid Hussain questioned, "Do the authorities say that Indian fuel comes to Bangladesh when it is cheaper over there?

He also said it would have been better if the government had discussed it with the stakeholders.

"The longer-term solution is to link the local market with the global market so that people can get used to this practice," he added.

Meanwhile, the Power and Energy Division in a press release on Friday has claimed diesel and kerosene prices in Bangladesh are still lower than neighbouring countries especially in India, Pakistan, Sri Lanka and Nepal.

The government has refixed the prices of diesel and kerosene as the price of fuel is rising in the international market.

On 3 November, the market price of diesel in India was Tk124.37 or Rs101.53 per litre, while in Bangladesh, the price of diesel was Tk. 65 per liter, which is Tk. 59.41 less, the release said.

The government will take steps to adjust the price of diesel and kerosene again if the fuel prices fall in the international market, according to The statement signed by Mir Mohammad Aslam Uddin, deputy chief information officer of the Ministry of Power, Energy and Mineral Resources.