Diesel and kerosene to become dearer
The Energy Ministry has proposed to the government to increase the prices of diesel and kerosene by around 15 per cent, according to sources in the ministry.
The proposal has been made pleading that Bangladesh Petroleum Corporation (BPC) which imports and distributes petroleum products is incurring "huge losses" due to price hike in the international market and that "huge quantities" of diesel and kerosene are being smuggled to India because of higher prices there.
Prices of kerosene and diesel in India now are equivalent to Tk 15.33 and Tk 16.80 per litre respectively while both the items are sold at Tk 12.95 in the country, the sources said. The ministry has proposed adjusting domestic prices to those in India, they said.
The proposal will be placed before the Prime Minister soon.
However, prices of petrol and octane will remain unchanged, they said.
BPC said the international oil price is so high that the corporation will incur a loss of Tk 800 crore between July last year and March this year. It further claimed that since 1990, Taka has been devaluated by big proportions but fuel prices have not been increased "significantly".
But oil industry sources completely rejected BPC's claim and termed the proposal a "blatant attempt at profiteering". They said crude price increased in recent months but did not reach the level of early 1997 when it had crossed 27 dollars per barrel.
"The BPC seldom makes any loss despite its poor market mechanism, mainly because of the government controlled pricing system in which supply and demand do not determine oil price," said a BPC official.
Enhancement in diesel and kerosene prices have a chain effect on cots of transportation, irrigation and other production and service sectors, pushing up the inflation rate.
But BPC believes there is no option for the government other than increasing diesel and kerosene prices. "The price of crude has been increasing since July last year and reached 24.55 dollars per barrel in December from 17.25 dollar. Price of motor spirit has also increased to 26.75 dollars from 19.75 dollars," said a BPC source.
The industry sources also admitted that crude price increased but were around 20 dollars per barrel during most of the period. "There might have been sudden increases beyond that level but it was for a week or two. Crude prices fluctuate off and on", an industry insider said.
On August 18, 1997, the government increased petrol and octane prices by around 60 per cent and that of diesel by a small proportion, arguing that the international price of oil had soared "very high" and BPC was incurring "huge losses". The prices of petrol and octane were increased to Tk 21 and Tk 23 respectively from around Tk 13 and Tk 14 per litre.
Three days later, three ministers at a press conference had promised to reduce prices when the price drops in the international market. But the prices were never reduced.
International market prices remained high for most of the period in 1997. From late 1997 till the middle of last year, the prices remained around 14-15 dollars and had plummeted to a historic low of 8-9 dollars in November-December 1998. But domestic prices were never re-adjusted, the sources said.
The BPC imports oil in two ways. It imports refined petrol, motor spirit, jet fuel, kerosene, and diesel on half-yearly basis. It also imports oil in smaller quantities. The price of this import is directly related to the international market scenario.
In 1997, while the government claimed that BPC incurred Tk 450 crore loss for petroleum import and sale, BPC paid Tk 1800 crore to the national exchequer as taxes.
BPC made a net profit of Tk 133 crore in 95-96, Tk 241 crore in 94-95, Tk 919 crore in 93-94, Tk 769 crore in 92-93 and Tk 789 crore in 91-92, sources said.
The annual requirement in the country is about 16 lakh tonnes of diesel, 4.5 lakh tonnes of kerosene, two lakh tonnes of petrol and one lakh tonne of octane. BPC imports about 1.2 million tonnes of crude and refines it at its processing plant to produce diesel and other fuel. It also imports 1.8 million tonnes of petrol and diesel and other petroleum products. Around Tk 2500 crore is spent for these imports.
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