Govt move to adjust oil prices

Differences within

BPC�s reckless profit-making under question

Differences have surfaced within the government over the adjustment of oil prices with the international market, as the finance ministry and the power, energy and mineral resources ministry have taken contradictory stances.
While finance minister AMA Muhith had hinted at a revision in oil prices at the retail level within a month in line with the prices in the global market, the state minister for energy, Nasrul Hamid Bipu, had said the government has no plan to lower the prices soon. The finance minister said on Sunday that he would sit with the Energy and Power Division, which has already prepared the documents for revising oil prices. He will then meet the Energy Commission to fix the price.
Meanwhile, Hamid told The Independent yesterday that the energy ministry has not thought of reducing oil prices yet. “The price of oil will not be reduced soon. We will, however, sit with the finance minister to discuss the issue,” he said.
On May 25, at a programme with the DCCI at the Secretariat, Muhith had also said the government would cut oil prices to some extent in the next budget to pass on the benefits of the steep fall in fuel prices in
international markets to the consumers. Yet, oil prices were not reduced in the budget. Since July last year, crude oil prices have plunged from over USD 110 a barrel to USD 45 a barrel in January this year, following weak global demand. Prices are currently hovering at around USD 40 a barrel.
Riding on the back of sliding global oil prices, the Bangladesh Petroleum Corporation (BPC) bucked its five-year losing streak in 2014–15 fiscal year, making a profit of Tk. 3,455 crore.
BPC Chairman AM Badrudduja told The Independent that they were making profits on the sale of all petroleum products since December. “We had borne losses for long. Now, we are trying to recover some of our losses,” he explained. Since oil prices have continued to slip in the international market, Bangladesh could save a staggering USD 1.5 to 2 billion this year—money that was earlier spent annually to subsidise oil imports, he added.
The BPC is making a whopping profit of Tk. 32 to 42 a litre on petroleum products. The production cost of octane is Tk. 57 per litre, but consumers are buying it for Tk. 99, giving the state-run corporation a profit of Tk. 42 per litre. The profit margin is Tk. 32 per litre for kerosene, Tk. 33 for diesel and Tk. 40 for petrol. For the fiscal year 2014–15, the government had set aside Tk. 2,400 crore for petroleum subsidies, but, of this amount, only Tk. 200 to 300 crore was ultimately used.
Meanwhile, the allocation for the energy and power sector has gone up by 98.54 per cent in FY 2015–16 compared to the last fiscal year. A total of Tk. 18,540 crore has been allocated for this sector in the proposed budget of the 2015–16  GFY. In the revised budget of FY 2014–15, the amount was Tk. 9,338 crore.
MA Taslim, Professor of Economics at Dhaka University, said lower oil prices help reduce the cost of living, by lowering transport costs and bringing down inflation. “Lower oil prices also pass through directly into lower fuel costs and retail electricity prices,” he said.
But since the government is the lone importer of oil, consumers’ benefits depend on lower petroleum prices in the domestic market.
Besides, as a condition for obtaining USD 987 million in loans from the IMF, the government has promised that if the gap in oil prices between the local and international markets exceeds Tk. 10, it would make price adjustments, he said.
Though the margin is much higher this time, the government has no plans to cut prices in the local market, as it is making a bid to recover the cumulative losses it has incurred over the years, he explained.
Meanwhile, in its latest Bangladesh Development Update, the World Bank said domestic petroleum prices have not been revised in line with the changes in the international market, resulting in the BPC building up huge liabilities to the tune of Tk. 50,430 crore at the end of the last fiscal year.
Since global fuel prices have started to fall in mid-2014, domestic fuel prices have not been adjusted. Fuel subsidies have effectively turned negative, and the authorities have not indicated any plans to adjust them in the near term, the WB report said.
Dr M Tamim, professor of mineral and petroleum engineering at Bangladesh University of Engineering and Technology (BUET), told The Independent that the prices of petrol and octane should be lowered, as the prices have been falling steadily for months in the international market.
He said the idea here that people who use petrol and octane mainly use these for running private vehicles, and can afford the high prices, is not appropriate now, since over 95 per cent of vehicles in Dhaka are run on compressed natural gas (CNG).
The prices of diesel should remain the same as the general people will not benefit from a reduction; rather, the businessman will reap the benefits. “Diesel is mainly used in buses and trucks and lowering its prices will not reduce the fares or freight costs,” he added.  He said the excuse that the BPC has proffered—that it has been bearing losses for years—was a misleading concept.

 

Govt move to adjust oil prices

Differences within

BPC�s reckless profit-making under question

Differences have surfaced within the government over the adjustment of oil prices with the international market, as the finance ministry and the power, energy and mineral resources ministry have taken contradictory stances. While finance minister AMA Muhith had hinted at a revision in oil prices at the retail level within a month in line with the prices in the global market, the state minister for energy, Nasrul Hamid Bipu, had said the government has no plan to lower the prices soon. The finance minister said on Sunday that he would sit with the Energy and Power Division, which has already prepared the documents for revising oil prices. He will then meet the Energy Commission to fix the price. Meanwhile, Hamid told The Independent yesterday that the energy ministry has not thought of reducing oil prices yet. The price of oil will not be reduced soon. We will, however, sit with the finance minister to discuss the issue, he said. On May 25, at a programme with the DCCI at the Secretariat, Muhith had also said the government would cut oil prices to some extent in the next budget to pass on the benefits of the steep fall in fuel prices in international markets to the consumers. Yet, oil prices were not reduced in the budget. Since July last year, crude oil prices have plunged from over USD 110 a barrel to USD 45 a barrel in January this year, following weak global demand. Prices are currently hovering at around USD 40 a barrel. Riding on the back of sliding global oil prices, the Bangladesh Petroleum Corporation (BPC) bucked its five-year losing streak in 201415 fiscal year, making a profit of Tk. 3,455 crore. BPC Chairman AM Badrudduja told The Independent that they were making profits on the sale of all petroleum products since December. We had borne losses for long. Now, we are trying to recover some of our losses, he explained. Since oil prices have continued to slip in the international market, Bangladesh could save a staggering USD 1.5 to 2 billion this yearmoney that was earlier spent annually to subsidise oil imports, he added. The BPC is making a whopping profit of Tk. 32 to 42 a litre on petroleum products. The production cost of octane is Tk. 57 per litre, but consumers are buying it for Tk. 99, giving the state-run corporation a profit of Tk. 42 per litre. The profit margin is Tk. 32 per litre for kerosene, Tk. 33 for diesel and Tk. 40 for petrol. For the fiscal year 201415, the government had set aside Tk. 2,400 crore for petroleum subsidies, but, of this amount, only Tk. 200 to 300 crore was ultimately used. Meanwhile, the allocation for the energy and power sector has gone up by 98.54 per cent in FY 201516 compared to the last fiscal year. A total of Tk. 18,540 crore has been allocated for this sector in the proposed budget of the 201516 GFY. In the revised budget of FY 201415, the amount was Tk. 9,338 crore. MA Taslim, Professor of Economics at Dhaka University, said lower oil prices help reduce the cost of living, by lowering transport costs and bringing down inflation. Lower oil prices also pass through directly into lower fuel costs and retail electricity prices, he said. But since the government is the lone importer of oil, consumers benefits depend on lower petroleum prices in the domestic market. Besides, as a condition for obtaining USD 987 million in loans from the IMF, the government has promised that if the gap in oil prices between the local and international markets exceeds Tk. 10, it would make price adjustments, he said. Though the margin is much higher this time, the government has no plans to cut prices in the local market, as it is making a bid to recover the cumulative losses it has incurred over the years, he explained. Meanwhile, in its latest Bangladesh Development Update, the World Bank said domestic petroleum prices have not been revised in line with the changes in the international market, resulting in the BPC building up huge liabilities to the tune of Tk. 50,430 crore at the end of the last fiscal year. Since global fuel prices have started to fall in mid-2014, domestic fuel prices have not been adjusted. Fuel subsidies have effectively turned negative, and the authorities have not indicated any plans to adjust them in the near term, the WB report said. Dr M Tamim, professor of mineral and petroleum engineering at Bangladesh University of Engineering and Technology (BUET), told The Independent that the prices of petrol and octane should be lowered, as the prices have been falling steadily for months in the international market. He said the idea here that people who use petrol and octane mainly use these for running private vehicles, and can afford the high prices, is not appropriate now, since over 95 per cent of vehicles in Dhaka are run on compressed natural gas (CNG). The prices of diesel should remain the same as the general people will not benefit from a reduction; rather, the businessman will reap the benefits. Diesel is mainly used in buses and trucks and lowering its prices will not reduce the fares or freight costs, he added. He said the excuse that the BPC has profferedthat it has been bearing losses for yearswas a misleading concept.