BPC struggles to account for loss

Despite huge profit

Zarif Mahmud: Bangladesh Petroleum Corporation (BPC) may make a loss of over Tk 10,000 crore in the current financial year, as projected during the formulation of the budget. However, the Ministry of Finance said that the company will have a net profit of more than Tk 3,800 crore at the end of the financial year by selling fuel oil. For the past few years, the state-owned fuel oil import and marketing company has made a huge profit on the contrary, after estimating losses. Desperate to account for the same despite a stable market and automated pricing system in place, BPC has estimated a loss of over Tk 5,500 crore in the next financial year as well. However, those concerned say that the organization will be profitable in the financial year 2024-25 as well.
Energy experts say that there is no question of loss by selling BPC’s fuel oil. Because they are coordinating the prices with the world market. In addition, in the previous years, when the price of oil in the world market went up, they increased it at an unusual rate in the country’s market. As a state-owned enterprise, BPC is more concerned with profit than providing affordable fuel to consumers. Their profit and loss estimation is not based on transparency. Therefore, experts advise to audit the financial accounts of BPC with an international organization.
In this regard, energy expert and BUET Professor M. Tamim told, “BPC is the opaquest of the state-owned institutions in the country. Several years ago, an international organization had suggested an audit by a foreign audit firm to look into their financial affairs in connection with a loan to BPC, but it did not happen. They are estimating losses in the sale of fuel oil, now there is no question of losses. Because he will sell at the price he buys from the international market. But coordination is not happening, instead they are making much more profit here. State-owned institutions cannot make profit like this.
According to the sources of BPC’s financial report, BPC estimated a loss of Tk 3,364.84 crore in the approved budget for the financial year 2022-23. Later in the revised budget, it was increased to Tk 7,985 crores. But at the end of that fiscal year, the total profit before tax of the company was Tk 6,296 crores by selling fuel oil. And the net profit after tax is Tk 4,586 crores. At this time, BPC has deposited a total of Tk 15,492.65 crore in various sectors including import duty, VAT, dividend, income tax in the government treasury. At the beginning of the current financial year 2023-24, the estimated loss of BPC from the sale of fuel oil was Tk 10,019 crores. However, in the revised budget, the Ministry of Finance said that the profit of the organization will be Tk 3,841 crores. A review of the accounts shows that BPC will make a total net profit of Tk 8,427 crore in the current and last two financial years. Moreover, in the current financial year, BPC estimated its total (operating) cost of goods sold at Tk 1 lakh 12 thousand 79 crores. Although at the end of the financial year, that expenditure stands at Tk 79,619 crores.
At present, the energy department is harmonizing the prices of fuel products – diesel, kerosene, petrol and octane in the domestic market with the international market. Taking that account into account, BPC should not incur losses in fuel oil sales. Despite that, the company has projected a loss of Tk 5,563 crore by selling fuel oil in the next fiscal year 2024-25. As the reason for this, the energy department is saying that this estimate has been made assuming the devaluation of the rupee against the dollar and the unstable situation of the fuel oil market.
Regarding the estimation of profit and loss in the sale of fuel oil, we talked to the officials of the Energy Department and BPC, but no specific answer was received. However, a top official of the energy department told on the condition of anonymity, “How can the price of fuel oil be – it is allocated from the BPC a few months before the budget is formulated.” At that time, if the price of fuel oil is high in the international market, it is estimated that BPC will incur losses. However, if the price in the international market falls within the financial year, the estimated situation may change in that case.
The government has launched the automatic price determination system on March 7 this year as a part of coordinating fuel oil prices with the world market. Four rounds of price adjustments have been made so far. In this, the price of diesel, kerosene, petrol and octane in the country’s market has decreased by two times. It has increased in two phases. However, consumer rights organizations have complained about the lack of transparency in the pricing process of BPC, the cost of energy products at various stages.
Consumer rights organization Consumers Association of Bangladesh (CAB) Vice President Professor M Shamsul Alam told, “BPC never discloses the process of calculating the price of fuel oil. But there is an international system for determining the price of fuel. But without considering these, BPC is forcing the price and charging more from the consumers. It is a kind of injustice. There are allegations of corruption against them by consumers. There is also a complaint of non-transparency from the international lenders against the company.
The government used to subsidize BPC for the sale of fuel oil. But the company started making profit from 2014-15 financial year onwards. Since then, BPC has made a profit of more than Tk 47,500 crore till the financial year 2022-23. Out of this, BPC made a loss of Tk 2,706 crore only in the financial year 2021-22.
Chairman of BPC Amin Ul Ahsan was contacted but could not get his statementto know about profit and loss estimation and profit of fuel oil.