Oil price high in Bangladesh but low in int’l market
Farhad Chowdhury : Bangladesh Petroleum Corporation (BPC) is making profit as the price of fuel oil is at a bearable level in the world market. The state treasury is also getting rich. But the people of the country are not getting the benefits. They have to buy oil at a higher price.
On the contrary, the International Monetary Fund (IMF) has initiated an automatic oil price adjustment system in coordination with the international market, as per the terms of the loan. There is a fear that the price of oil will increase further in the country’s market.
Industry stakeholders say that fuel oil prices in the country increased by a record 47 percent in August 2022 due to losses. However, in that financial year (2022-23), BPC made a net profit of Tk 4,586 crore. This led to a profit of Tk 42,933 crore in 9 years. The average profit of BPC is Tk 10 to Tk 15 per liter.
BPC is not only making profit but also giving huge money to the government treasury. The organization has deposited Tk 1 lakh 597 crore in the last 9 years. Experts say, the goal of state institutions is not business. So instead of focusing on profit, focus should be on providing products to the people at affordable prices. According to them, the reduction in fuel prices in the country will bring down the prices of many daily commodities, which may provide some relief in the current high price market.
The demand of fuel oil in the country is about 90 lakh tons. Of this, BPC imports 65 to 70 million tonnes. Apart from this, private power plants import furnace oil for their own needs. Recently, the government has allowed the import, refining and sale of fuel oil at the private level. BPC imports 1.5 lakh tonnes of crude oil. The rest is refined fuel oil. The largest import is diesel, which accounts for about two-thirds of the total supply. But more profit comes from selling octane, petrol and Jet fuel. BPC buys fuel oil through G2G system and contracts from various international companies.
In FY 2022-23, 58 percent of fuel oil is used in transportation, 18 percent in electricity, 15 percent in agriculture, 6 percent in industry, 1 percent in household and 2 percent in other sectors.
BPC’s huge profits
An analysis of BPC’s financial reports shows that it made a profit in 2014-15 after six consecutive years of losses. BPC has made a profit of Tk 42,933 crores in the last 9 years. Out of this, in 2014-15 fiscal year, the organization made a profit of Tk 4,212 crores from the sale of oil. BPC made a profit of Tk 7,753 crore in 2015-16 financial year and Tk 4,551 crore in 2016-17 financial year due to lower oil prices in the international market. Among them, the price of fuel oil was reduced on April 25, 2016 in the country’s market.
In the financial year 2017-18, it made a profit of Tk 6,533 crores. Due to the increase in fuel oil prices in the international market, the company’s profit fell to Tk 3,846 crore in the financial year 2018-19. During the Corona epidemic, oil prices started to fall in the world market. In the financial year 2019-20, the profit of BPC is Tk 5,065 crores.
Due to the epidemic, the oil price in the international market has reduced by a record amount. In the financial year 2020-21, the company’s profit is Tk 9,092 crores. After the epidemic, the fuel oil market started to rise around the world. The company suffered a loss of Tk 2,705 crore in the financial year 2021-22.
In June 2022, the price of crude oil reached $122.71 per barrel. After that the price of oil started to fall. However, in August of that year, the price of oil in the country’s market was increased by a record 50 percent due to the loss. In the face of criticism, oil prices were reduced nominally (Tk 5 per litre) in August.
Govt is also taking profit
BPC has deposited Tk 15,492 crores to the government fund in the last financial year including VAT, tax, dividend, surplus. In the financial year 2021-22, BPC made a loss but paid Tk 15,798 crores to the state treasury.
According to the data, Tk 15,778 crores in 2020-21 financial year, Tk 14,146 crores in 2019-20 financial year, Tk 9,590 crores in 2018-19 financial year, Tk 9,097 crores in 2017-18 financial year, Tk 9,248 crores in 2016-17 financial year, Tk 6,219 crores in the financial year 2015-16, Tk 5,229 crores in the financial year 2014-15 government has taken from BPC.
People not getting benefits
The price of oil in the international market has been hovering between $70 to $80 per barrel for several months. BPC is making profit due to low prices. However, people have to buy fuel at the previous higher price. Last Friday, the price of Brent crude was $80.65 per barrel and Marban crude was $80.37 in the world market.
When asked to know, Consumers Association of Bangladesh (CAB) energy advisor Professor Shamsul Alam said that people’s pockets are cut by increasing the price by talking about losses. Money is also being taken in the name of tax-VAT. Government is also profiting, BPC is also profiting. But people are not getting anything.
He said, there are questions about financial transparency of BPC. International donor agencies have been demanding a financial audit of the BPC by a world-class audit firm for a long time. But BPC does not take it into consideration. Shamsul Alam said that in the critical situation of the economy, the government should have thought of the people and discounted the price of oil.
Prices may go up
The International Monetary Fund (IMF) has made a condition for the removal of oil subsidies as a condition of the loan. The company said to automatically adjust oil prices with the international market every month. The IMF asked to start this method from last December. The government has not finalized the formula for the automatic price hike as there are national elections. It can be launched next February or March. Finance and Energy departments are currently discussing to finalize the proposal.
According to the BPC proposal, the system would initially adjust prices once a month. VAT, taxes, various commissions, charges – keeping these fixed, the price of oil will fluctuate with the international market.
Experts believe that the oil price in the country will not decrease but will increase in the automatic system. Because, BPC has claimed 10 percent profit in addition to the VAT-tax of the government. As before, the organization is planning to cut the people’s pockets and make a profit – the complaint of the concerned people.
BPC Chairman ABM Azad refused to comment on this. Anupam Barua, director (marketing) of the organization said, the price will be determined as per the government’s wishes.
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