IMF condition may be ignored
Zarif Mahmud: The new formula that the government is supposed to implement to adjust the price of fuel oil with the world market is not happening. If the adjustment is to be made, the price of fuel oil in the country will increase a lot at the moment. That is why the government is moving away from its previous position on this issue. Besides, the Prime Minister has been informed about the situation that will arise if the new price adjustment formula is implemented.
At the same time, the Ministry of Finance has been given the responsibility to continue discussions with the International Monetary Fund (IMF). Because as per the terms of the IMF, before the second installment of the loan was released, the effective formula was supposed to adjust the price of fuel oil.
Meanwhile, the price of crude oil has increased again in the international market. Markets turned higher after Russia and Saudi Arabia announced further cuts in oil supplies. A barrel of fuel oil is selling at around $97. Related organizations are also predicting this price to increase further.
When asked, Minister of State for Power, Energy and Mineral Resources Nasrul Hamid said Daily Industry that the new formula for adjusting the price of fuel oil is not being implemented at the moment. When it was pointed out that this was the condition of the IMF, the minister said, “If there is a condition, it will be there, but it is not possible.” When asked about the reason for not being possible, he said, now the price in the world market is very high. At present, if the price of fuel oil is adjusted according to the new formula, the price will increase a lot in the country’s market.
When asked whether the IMF would accept it, the minister said, “It is not my concern if the organization does not accept it.” I did not own the loan, the Central Bank took it. Central Bank will understand that.
When contacted, the former chief economist of the Dhaka office of the World Bank Zahid Hossain said Daily Industry that the new formula for adjusting the price of fuel oil was to be implemented before the second installment of the IMF loan was released. The first is the formulation of the formula and the second is its implementation. It should be mentioned there that the adjustment will be every three months or every month.
If the IMF knows the position of the government, it may say to finalize the formula. And for this there should be a government directive i.e. issuance of gazette. If the formula averages the price of the last three months, then the price in the world market has been low in the last three months. Recently it has increased. In that case, it is not supposed to be the way the risk of increasing.
A delegation of IMF is coming to Dhaka next October. The task of this team is to review the progress of loan terms. Because the second IMF loan waiver will be made in November. It will be observed to what extent the conditions given by the organization have been complied with earlier.
Incidentally, one of the conditions given by the IMF against the loan of $4.5 billion to Bangladesh is to reduce the subsidy on fuel oil. Leaving fuel pricing to the market. This will reduce the tendency to subsidize fuel oil. Earlier in May, the IMF delegation met with the Energy Department and urged for price adjustment.
A senior official of the electricity department involved in this process said that a new formula has been formulated to adjust the price of fuel oil according to the conditions of the IMF. There government is thinking of doing monthly price adjustment as well as weekly basis. Because the price of fuel oil is adjusted every week in the neighboring country India. He has given a letter from the ministry to BPC to implement the formula. In the existing system, a service charge of 5 percent and a welfare charge of 5 percent is being levied on the import of fuel oil, which is requested to be withdrawn.
Apart from this, it has been seen that the loss of Tk 9 per liter of diesel and the profit on octane is Tk 16. Here is the decision to reconcile income and loss. But as the prices are currently increasing in the world market, if adjusted according to this formula, the country’s market will increase even more. But in the meantime, the national elections are coming up. As a result, the government does not want to increase the price of fuel at the moment.
That is why the ministry is withdrawing from implementing the new formula. Earlier, BPC made a profit of Tk 46 thousand crores in the last five years by buying oil at a low price from the international market and selling it at a high price. If the price of oil increases in the world market, it increases in the country. But it does not decrease. Currently, the price of diesel per liter is Tk 109. Besides, kerosene per liter is Tk 109, octane is Tk 130 and petrol is Tk 125.
According to BPC sources, 73.11 percent of the total fuel oil used in the country is diesel, 5.86 percent of petrol and 4.78 percent of octane. At present, the annual demand of fuel oil in the country is 70 to 72 lakh tons. Of this, diesel demand is 48 to 49 lakh tonnes, of which 80 percent is imported by the government.
Currently crude oil is being imported from Saudi Arabia and United Arab Emirates. And refined oil is imported from Singapore, Malaysia, Indonesia, United Arab Emirates, Kuwait, Thailand and India. After the start of the Russia-Ukraine war, diesel is being imported from India through pipelines at affordable prices.
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