Muhith signals new fuel price formula
The government will introduce an automatic fuel oil price adjustment system in three months to keep the prices on par with the international market, Finance Minister AMA Muhith said yesterday.
“I think it will take three months to design the system, and will be implemented in phases,” Muhith told reporters after a meeting with a delegation of the International Monetary Fund (IMF) at his office at the secretariat.
Once the fuel pricing formula is introduced, prices of kerosene, diesel, petrol and octane will be determined automatically based on their prices on the international market.
At present, the government fixes oil prices, which hardly reflect the swings in the international market. The authorities keep the prices artificially low and subsidise the sector heavily.
The measure will help cut Bangladesh Petroleum Corporation's dependence on government-directed borrowing from nationalised commercial banks to pay the subsidies.
The state-run BPC yesterday said it incurs at loss of Tk 1,100 crore to Tk 1,200 crore a month to provide fuel to people at subsidised rates.
Muhith said many countries have the fuel oil price adjustment system. “The fuel oil price goes up and down in those countries with the price fall and up in the international market,” he said.
The minister indicated that the government would have to take some unpopular decisions for the sake of the economy. “We're going to introduce the automatic fuel oil adjustment system and we're working on it for some days.”
The minister said the paperwork for this is almost complete. Once completed the paper will first go to the cabinet and then be sent to the energy regulatory body.
“I've already talked to the regulatory body and they've shown a positive attitude in this regard."
Muhith said there would be a certain margin for the fuel oil price. “Such as, you may think the present fuel oil price will add to or deduct five percent extra. When the international price crosses the limit, the fuel oil price will be automatically adjusted with the international price,” he said.
He also said he talked to the IMF delegation led by its Deputy Divisional Chief for Asia and Pacific Department David G Cowen about the release of the first instalment of the much-awaited $987 million loan under the extended credit facilities with zero percent interest rate.
The Washington-based lender will release the fund today and Bangladesh will get $141 million in the first instalment. The remaining amount will be given biannually in six equal instalments to support the balance of payment, which is under pressure now.
Muhith said the IMF did not impose any condition for the loan. “Instead, Bangladesh proposed some reforms for taking this loan. It was our proposals to make some reforms …they just put some dates on those proposals,” he added.
The minister said the government would continue the subsidies in some certain sectors in the upcoming budget for fiscal 2012-13, which will be announced on June 7.
He said hartal enforced by the opposition is bad for economy. “It can't be good for any economy in the world. Political stability is a must for economic development."