Govt hikes fuel prices

FE Report

The government has raised fuel prices by Tk 2.0 each with effect from today (Friday) to cut growing losses of state-owned oil company and offset the impact of soaring international oil prices on local economy.

According to a government order issued Thursday evening, diesel will now trade at Tk 46 per litre, kerosene Tk 46 per litre, petrol Tk 76 per litre, octane Tk 79 per litre and furnace oil Tk 42 per litre.

Until Thursday, the price of diesel was Tk 44 per litre, kerosene Tk 44 per litre, petrol Tk 74 per litre, octane Tk 77 per litre and furnace oil Tk 40 per litre.

The hike came a month after furnace oil price was raised 14.28 per cent, or Tk five taka, to Tk 40 per litre.

"The government has enhanced fuel prices to reduce losses of cash-strapped state-owned Bangladesh Petroleum Corporation (BPC)," BPC Chairman Md Muktadir Ali told the FE Thursday.

BPC's losses have mounted in recent months after crude oil prices shot above $100 dollars per barrel amid global supply concern in the wake of sweeping democratic uprising in the oil-rich Middle East countries.

Refined petroleum now trades at $132 dollars in the international market against around $100 dollars when the last time fuel prices were hiked in the country in 2009.

Commissioning of a number of rental power plants, which use diesel and furnace oil to generate electricity also spiked BPC losses, forcing the government to double energy subsidy to Tk80 billion in the current fiscal year.

Mr. Ali said despite the hike the BPC will have to incur loss of Tk 31.44 for every litre of diesel, Tk 30.49 for kerosene, Tk 6.02 for octane and Tk 10.96 for furnace oil.

Officials said the latest hike in gasoline prices will also help check the smuggling of petroleum products to the neighbouring India and Myanmar where the price of fuel is costlier than that of Bangladesh.

They, however, feared that the enhancement might push up prices of food and transportation at a time when point to point inflation is hovering around double digit. Inflation has hit 31-month high to 10.49 per cent in March.

The price hike won't affect the farmers as the government plans to give cash subsidy for diesel to be used for pumping water to farmland, they said.

The energy regulator had earlier reduced the price of diesel and kerosene by Tk 2.0 per litre in January 2009 after the energy prices tanked due to the one of the worst global recession in decades

Furnace oil price was earlier raised to Tk 40 per litre from the previous Tk 35 per litre on April 7 this year.

The country currently imports 4.0 million tonnes of petroleum products annually. But the import could double in the next couple of years due to commissioning of dozens of diesel and furnace oil fired power plants.

Finance ministry officials said the country's fiscal deficit is facing growing pressure due to spike in oil prices and consumption.

A senior official told the FE late last month that energy subsidy would hit Tk150 billion in the coming fiscal year --- or about nine per cent of the planned Tk1.65 trillion budget.

The hike in petroleum price will enhance electricity generation from the oil-based power plants, said a senior Power Development Board official.