Bangladesh Petroleum Corporation's profit plummeted 45 percent in the first 10 months of the fiscal year due to the government's resistance to adjusting the domestic price with that prevailing on the global market.
While the stance filled the national coffer when the prices were low on the international market, it is turning out to be a liability when the prices are on the rise.
Petroleum prices dropped drastically on the global market in 2014 and remained almost steady for the next three years. BPC had incurred losses from fiscal 2009-10 through to fiscal 2013-14 and in the following three years made huge profits.
“Since November we have been bleeding Tk 34 crore a day,” said Md Altaf Hossain Chowdhury, director of BPC.
Crude oil was below $50 a barrel until November last year, after which it started creeping up. Yesterday, it was $60.56 a barrel. And BPC's problems were exacerbated by the depreciation of the taka against the US dollar in recent times.
Between July last year and April this year, BPC logged in Tk 3,995 crore as profit, in contrast to Tk 7,334 crore a year earlier, according to the Economic Review placed in the parliament on Thursday.
In February, BPC asked the energy ministry to introduce an automated pricing formula to adjust petroleum prices against international prices on a monthly basis -- a move that has long been recommended by the World Bank, finance ministry and many local economists.
The price gap, especially for diesel and furnace oil, between the local and international markets has widened, according to a BPC official. The energy ministry is yet to take a call on the pricing formula. “If the government does not adjust the prices upwards in keeping with those on the global market, we might end the year with minimal profit or even losses,” the BPC official added.
But energy ministry officials said a proposal will be sent to the government higher ups to increase the price of diesel and furnace oil used in power plants.
Earlier, the WB and the International Monetary Fund had advised the government to deregulate the domestic oil prices and introduce a system that makes automatic adjustments of oil prices in line with the global market rates.
As the price in the international market was low then, it was the best time for introducing the automatic price adjustment system, the multilateral lenders had said.
Accordingly, the finance ministry also sent a proposal outlining the economic benefits of the price cut.
However, BPC opposed the proposal, saying that it needed to make up for its huge previous losses.
As a result, the government shelved plans of introducing the automated pricing mechanism, making do with slight cuts in petroleum prices in April 2016. It was supposed to slash the prices further but that never happened.
Though BPC's profits fell, the 50 state-owned enterprises altogether turned in profits of Tk 9,295 crore in the first ten months of the fiscal year, up 40.49 percent year-on-year, thanks to the Bangladesh Road Transport Corporation.
Of the amount, BRTC alone accounted for Tk 6,181 crore, according to the Economic Review.
Among the SoEs, 33 made profit and the rest are loss-making institutions.