The Bangladesh Petroleum Corporation (BPC) is continuing to sell diesel at a price far below its procurement cost despite a Tk20 increase in fuel prices, leaving the state-run corporation facing heavy losses amid a surge in international oil prices.
BPC Chairman Dr Md Rafiqul Islam said the corporation was purchasing diesel at around Tk205 a litre while selling it at Tk135 under the new pricing structure. He said the latest price adjustment would cover only about a quarter of the losses.
According to the chairman, BPC had been losing around Tk3,800 crore a month on average over the past six to seven months. If the trend continues, annual losses could reach around Tk50,000 crore, he said.
Diesel accounts for about 65 percent of BPC’s petroleum sales, making it the biggest factor behind the corporation’s financial position.
Under the new pricing structure, diesel is priced at Tk135 a litre, while kerosene, petrol and octane cost Tk155, Tk160 and Tk165 respectively.
Rafiqul Islam said BPC had used funds accumulated during previous profitable years to absorb the losses and avoid raising fuel prices earlier. However, the corporation now needs additional funds to continue fuel imports and open letters of credit.
BPC needs around Tk1,500 crore to meet fuel-import financing requirements up to October and another Tk12,500 crore for purchases approved through December, he said. The corporation is seeking a special financial arrangement from the government to address the funding gap.
The chairman said BPC had not received direct subsidies over the past six months and had instead covered the losses from its accumulated funds. The government, however, has arranged around Tk5,000 crore to help meet the corporation’s immediate financing needs.
BPC had remained profitable in most recent years before the current crisis. Rafiqul Islam said the corporation last faced major losses around 2013-14, while profits earned in subsequent years were retained for development projects and other needs.
The accumulated funds have now been used to absorb losses caused by higher international fuel prices, putting increasing pressure on BPC’s financial reserves.
According to Rafiqul Islam, rising international fuel prices are the main reason for the losses. Higher freight charges, insurance costs and longer shipping times have also increased procurement expenses.
Some fuel shipments that previously took around 15 days to arrive are now taking as long as 50 days, he said.
BPC imports petroleum under government-to-government arrangements with several countries as well as through open tenders. It currently has G2G supply sources from around eight to nine countries.
State Minister for Power, Energy and Mineral Resources Anindya Islam Amit said the government had been forced to adjust fuel prices because of higher international prices, freight and insurance costs.
He said the latest adjustment was expected to reduce BPC’s annual losses by around Tk10,000 crore and apologised to consumers for the hardship caused by the increase.
Amit said fuel prices in Bangladesh had remained among the lowest in the region, creating a risk of fuel smuggling to neighbouring countries. He said the government had adjusted prices both to reduce that risk and to continue social protection programmes.
He said diesel costs Tk134.76 a litre in Kolkata, compared with Tk135 in Bangladesh after the latest adjustment, and that the government had considered regional price differences while taking the decision.
The BPC chairman said the corporation could benefit if international fuel prices decline in the coming months. The latest adjustment, he said, was intended to provide some financial cushion so that BPC’s development projects would not be disrupted by the losses.
The state minister said fuel prices could be reduced if international markets stabilise. He also expressed hope that the Middle East crisis would ease, allowing global fuel prices to return to previous levels or fall further.
Energy expert Prof Dr Ijaz Hossain said the government had raised fuel prices because of the sharp increase in international oil prices. He said consumers would need to reduce fuel use but stressed that domestic prices should also be lowered when international markets return to normal.
He also urged the government to monitor the market closely to prevent the fuel price increase from being used to justify unjustified increases in the prices of other goods.
