Energy Prices: Govt profiting, people losing
The government goes into an immediate-action mode to hike fuel prices in sync with global oil prices. But consumers do not get any benefit when the prices of fuel come down in the international market.
People in power defend their move to increase prices, saying that the state-owned corporation has been counting losses, no matter if it is due to corruption, mismanagement or inefficiency. But they don't reduce the prices.
After a long gap, the government has been making huge profits by selling petroleum products such as diesel, petrol and octane for several years.
According to the data of Bangladesh Petroleum Corporation (BPC), it is going to make a profit of Tk 7,334 crore this fiscal year ending on June 30, down from a whopping Tk 9,040 crore a year ago. In the last three years the BPC made profits of Tk 20,500 crore.
The last time the BPC slashed the fuel prices slightly was in April last year considering crude oil price at $80 per barrel when the actual price in the international market was $40 per barrel. Now a barrel of crude oil costs less than $50. Yet, the government seems to be least interested in passing on the price benefits to consumers.
Economists and development partners have repeatedly urged the government to lower the fuel prices for the sake of the economy, but the government is reluctant to do so.
For implementing a budget of over Tk 4,00,000 crore for fiscal 2017-18, the government proposes to increase tax burden on people. Taxes have been increased in the budget even on bank accounts of small savers.
But there is no announcement of cutting fuel prices, which would have benefited the economy.
According to the finance ministry, price cuts would benefit transport sector, power sector and agriculture.
The Centre for Policy Dialogue said a 10-percent cut in the petroleum price would lead to a rise in both the gross domestic product (GDP) and private investments by about 0.3 percent. And inflation would come down by 0.2 percentage points, said the think-tank in January this year. Export, on the other hand, may increase by 0.4 percent.
Households are likely to experience a 0.6 percent rise in consumption on average, and income of firms may go up by the same margin. Consumption of households in rural areas is expected to increase by 0.7 percent, the think-tank added.
Finance Minister AMA Muhith in the post-budget briefing on Friday said he could not say anything regarding the fuel prices at that point.
He, however, hinted that gas prices would go up next year.
The government has been planning to start importing liquefied natural gas (LNG) from the next year. Once imported LNG is added to the pipeline, gas prices would have to be adjusted to the prices on the international market.
The petroleum price in the international market has remained low for a while, but consumers don't see any such adjustment.
Despite petroleum price cuts in April last year, the BPC made a profit of Tk 27.75 by selling a litre of octane, Tk 23.50 per litre of petrol, Tk 15.75 a litre of diesel and Tk 16.75 a litre of kerosene.
The government did not want to lower the prices further so that the BPC could repay loans and recover from losses it incurred between fiscal 1999-2000 and 2014-15.
The petroleum price recently rose slightly in the international market but the BPC is still making profits, a finance ministry official said.
Now that the state-run organisation has admitted having paid all the bank loans and that it is making profits, pressure mounted on the government to reduce the fuel prices.
The government provided Tk 44,000 crore in subsidies to the BPC between fiscal 2006-07 and 2014-15, but the BPC has not yet returned the money to the finance division though it is making profits, said the finance ministry official.
He said the tax payers' money was given to the BPC as subsidy.
Sources said the finance ministry repeatedly recommended lowering the fuel prices, but the energy ministry was reluctant to go ahead with the price cuts reasoning that the prices already started to increase in the international market.
The finance ministry prepared a detailed analysis of the economic impact of oil price cuts and shared it with the energy ministry.
On average, the BPC imports 50 lakh tonnes of petroleum products a year. Of those, 64 percent is diesel, 17 percent furnace oil and 5 percent kerosene. The rest are octane, petrol and other products.
Of the fuel imports, 46 percent is used in the transport sector, 26 percent in power sector and 17 percent in agriculture.