Cost escalation, growing demand to ‘cost Bangladesh $ 500mn’ extra
Industry Desk: Bangladesh has planned to import 6.4 million metric tons (MT) of fuel oils for the calendar year 2022 amid the overheated international market.
The global oil market remained volatile as petroleum prices have gone up to a highest $83 per barrel for crude oil and $93 for refined fuel from below $30 for crude and $40 for refine.
In terms of quantity, this is one (1) million MT up from the current year’s total import as the country imported 4.544 million MT in 2021 to meet its requirements up to December this year.
The figure came from the annual import plan of Bangladesh Petroleum Corporation (BPC) which was already approved by the Cabinet Committee on Economic Affairs, the highest policy approval body. In the proposal, the BPC made the petroleum forecast mentioning that the Covid-19 situation has improved with vaccination of 10 percent of the population and the regaining of the country’s economic activities resulting in an increased price of petroleum fuels.
However, the country’s principal petroleum marketing body did not give any indication of financial involvement to execute its fuel import plan.
“We’ve just received a nod from the government’s highest policy level. But no cost has so far been calculated,” said Syed Mehedi Hasan, director (operations and planning).
“Hope, we can make an estimate about the possible cost by next month,” he told.
BPC documents also show that it has taken approval for the import of another 670,000 MT of refined fuel to “deal with any ion” caused by the rise in fuel demand.
Though the BPC did not calculate the possible cost, the economists and energy experts are worried about the escalation in the cost in petroleum import.
They said it is obvious the country’s petroleum import bill will go up enormously in 2022 for two reasons — one for higher quantity of imports and another for higher price in petroleum on the global market, said Dr Khondaker Golam Moazzem, BPC director (research).
Considering the upward trend in price and demand, he calculated that the country may have to spend $3.94 billion (equivalent to Tk 33,056.6 crore) in 2022 to import the proposed 6.4 million MT of petroleum. The calculation was made including the existing 34 percent taxes in the cost.
He said this means the country will need to pay an extra $516 million in 2022 over its spending of $3.424 billion in 2021.
If 34 percent overall taxes are waived, the cost will come down to $2.94 billion, said Dr Golam Moazzem, who believes the government should cut the taxes on import of petroleum to give a relief from the burden of high cost of fuel for the sake of economic recovery from the shock of the Covid-19.
The CPD director thinks the BPC’s estimate was a bit inflated somehow. Bangladesh may not need to increase the import quantity by 1 million MT as the economy is yet to get back its full pace, he said. So, the import may not be required to enhance to that scale, he added.
Meanwhile, the World Bank and many other international agencies have made forecasts that the petroleum price will maintain the uptrend and may even cross the $100 benchmark anytime in 2022.
If that happens, said a BPC official, the petroleum cost may go up further.
Energy expert Dr Ijaz Hossain, former professor of Bangladesh University of Engineering and Technology (Buet), said the government should not change a long-pursued policy to keep the diesel price lower than that of other fuels.
As the diesel consumption is the highest by most consumers at different sectors, including transport and agriculture and shares 73 percent of the total consumption pattern, its price is always kept lower than others to reap mass economic benefit, he told a recent webinar on fuel price.
Of the total 6.4 million of planned fuel import in 2022, some 5.18 million MT will be procured as refined petroleum while crude oil will be imported 1.3 million MT, the BPC official document shows.
In the Covid-hit 2021 calendar year, the BPC imported a total of 5.485 million petroleum of which refined portion was 4.544 million MT and crude was 1.24 million MT.
The BPC document also reveals, of the refined petroleum, 2.59 million MT, which shares 50 percent of total import, will be purchased from eight international suppliers through negotiations. These suppliers are KPC of Quit, Unipec and Petrochina of China, BSP of Indonesia, PTLCL of Malaysia, Enoc of the UAE, PTTT of Thailand and NRL of India. The remaining 50 percent or 2.59 million MT will be imported from different international suppliers through open tenders.
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