Tk5 drop in fuel prices after Tk46 increase

A 10% cut in diesel tax has resulted in a flat Tk5 decline in prices of diesel, kerosene, petrol and octane per litre – a downward adjustment, which users and experts find less than what should have been.

The decision came a day after the reduction of 5% import duty and 5% advance tax on the most-consumed fuel oil, diesel, which accounts for 73% of the country's total petroleum imports.

The price of diesel and kerosene is now Tk109, petrol Tk125 and octane Tk130 per litre, the Energy and Mineral Resources Division said in an official gazette issued Monday night, making the new prices effective from midnight.

The prices have been adjusted at consumer level in response to lowering of import duty from 10% to 5% and withdrawal of all advance taxes on diesel by the National Board of Revenue, it said.

Infographic: TBS

State Minister for Energy Nasrul Hamid on Monday said price adjustments have been made following some reduction in tax. Further adjustments will be announced if global fuel prices fall, he assured.

Despite the reduction, diesel import is still subject to a 22.75% duty incidence.

The reduction of Tk5 per litre against a whopping increase of Tk34 to Tk46 per litre would have little or no impact, experts and stakeholders have said in their immediate reactions.

Energy expert and Bangladesh University of Engineering and Technology (BUET) Professor Dr Mohammad Tamim said general people will not benefit from this price slash.

"This price reduction will have no impact on transportation fare, inflation and prices of daily essentials," he said.

Agro-economist Dr Jahangir Alam Khan appreciated the government for its good intention as it lowered fuel prices, but said the range of price cut-- Tk5 per litre-- would not have much impact on agriculture -- either in irrigation cost or transportation cost of farm products.

"The government should give farmers diesel at subsidised rate or cash incentives for irrigation. Otherwise farmers will not be able to recover the cost of Aman farming this season," he said. 

However, state oil monopoly Bangladesh Petroleum Corporation has its own explanation. A high official at the BPC told The Business Standard that import duty applies on the tariff value of the petroleum which is only $.40 per litre.

So the outcome of the 5% import duty cut is only Tk1.90 per litre. But the government reduced the price by Tk5 per litre.

Though the internal resource division of the finance division withdrew the advance tax, the BPC official said that they still have to pay the advance tax.

In the 2020-21 fiscal year, BPC imported a total of 41.74 lakh tonnes of different types of refined fuels with diesel accounting for 36.35 lakh tonnes.  

NBR officials, when approached, declined to make an official comment on how much fuel prices should drop in response to cut in import duty and withdrawal of advance taxes. "Roughly, there could have been a decline of Tk8-Tk10 per litre due to the reduction in import duty. But there are issues like advance tax refunds, which make an instant price assessment a bit complicated,"a customs official said.

According to NBR, fuel imports were subject to 34% tax incidence including  10% customs duty, 15% VAT, 5% advance income tax (AIT), 2% advance tax (AT). In addition, there is 2% VAT at consumer level.

On Sunday, 5% customs duty and 5% AT were withdrawn.  

Any impact is less likely

Asked how they view the impact of the Tk5 cut in fuel price per litre, businesses said there would hardly be any impact on commodity price or production cost.

Bangladesh Freight Forwarders Association vice president Khairul Alam Sujon said the government agencies need to be active to monitor prices to get the benefit, if any, from such reduction in fuel price.

Diesel price hike enhanced captive power generation cost in factories and ready-made garment is among the sectors most affected. Rakibul Alam Chowdhury, vice president of BGMEA, said, "Diesel price was raised by Tk34 per litre, now it has been lowered by only Tk5. Any positive impact is not likely."  

Chattogram Chamber president Mahbubul Alam, however, felt that traders should adjust their costs with whatever reduction has been made in fuel prices. "I hope they will make adjustments in prices as expected."

Bangladesh Inland Container Depot Association (BICDA) Secretary General Ruhul Amin Shikder said they would have to review if any reduction in ICD charges, hiked by 25% in response to 42% rise in diesel price, would be viable for them at all.

Energy expert and Bangladesh University of Engineering and Technology (Buet) professor Dr Mohammad Tamim, said that people will not benefit from this price slash.

"This price reduction will have no impact on transportation fare, inflation and the price of daily essentials," he said.

On 5 August, the Energy and Mineral Resources Division hiked the diesel and kerosene price by 42.5% as well as petrol and octane price by 51%.

The price of diesel increased by Tk34 to Tk114, petrol by Tk44 to Tk130 and octane by Tk46 to Tk135.

The price of kerosene was also increased by 42.5% to Tk114, in the across-the-board raise.

Fuel oils saw their record hike in prices at one go, leading to a chaotic rise in transport fare, commodity prices and factory costs.

Cost of irrigation also went up as low rain and power cuts enhanced use of diesel irrigation pumps for paddy cultivation.

Amid worries for further rise in inflation and adverse impact on farming and factory productions, there were demands for reviewing the price hike and withdrawing the fuel tax. There were suggestions that farmers can be provided with diesel at subsidised rate for irrigation.

Shahidul Islam, vice-president of the Motor Launch Owners Association, said, only Tk5 decrease will give no respite for us. Nothing will be the same.

We need 6,000-7,000 litre of diesel per trip, that means we can only save Tk30,000 to Tk35000. It is nothing for us compared to our total operating cost, added Shahidul Islam, also the owner of the Barisal route operating Parabat Launch.

"Since the opening of the Padma Bridge, we have been running at a loss. Although fares have been hiked, we cannot take the raised fare due to the passenger crisis. Even we have to take less than the previous fare. So only a Tk5 reduction is not enough for us."

 Khandaker Enayet Ullah, secretary general of the Bangladesh Road Transport Owners' Association, said, as the government decreases the fuel oil price, fares on transports also will be reduced. It was our commitment to the people.

Asked how much it will be reduced, he said, the government decreased Tk5 per litre and the fare will be reduced proportionately. However, the exact amount can be fixed with BRTA after assessing new costs.