The three-and-a-half-year-long record high oil price in the international market and the increasing dollar price are causing a huge loss to the government. The two factors are also putting foreign reserves under pressure, as the government has to foot higher import bills.
Sources in the Bangladesh Petroleum Corporation (BPC) said that they earned good profits from fuel sales for several years. But non-adjustment of oil prices with that in the international market is causing a huge loss to the BPC.
The high oil prices in the international market and its payment through dollar, the exchange rate of which has shown an uptrend over the last one year, are exerting a huge pressure on the foreign currency reserves, they said.
The sources said that, in December 2017, BPC, the government entity to import, store, market, and distribute petroleum products in the country, incurred a loss of Tk. 4 per litre of diesel and Tk. 10 per litre of furnace oil, resulting in losses of about Tk. 250 crore in all. However, the BPC made some profit by selling petrol and octane.
“Diesel accounts for 80 per cent of the demand for petroleum products and furnace oil for 10 per cent. So, mostly the prices of diesel and furnace oil affect the economy. If the prices of oil in the international market rise any further, the BPC’s loss will also go up proportionally. It may cross Tk. 1,500 crore,” said a BPC official.
In the last fiscal year, the BPC earned a profit of Tk. 4,551 crore, as oil was cheaper in the international market.
“But the BPC started to bleed since August 2017, not only because the international market price went up, but also because the dollar price started shooting up. The price per dollar was Tk. 79 in August. It has gone up to Tk. 83.20 now,” said a government official.
Mir Ali Reza, director (finance) of BPC, confirmed, “We are definitely making a loss by importing petroleum products.”
Sources said that in the dry season, the demand for diesel in the agricultural sector is also at its peak. “But the main concern is diesel being smuggled to India. Since diesel is costlier by Tk.9–10 per litre in India, it is easy to smuggle it to the neighbouring country,” explained a source. BPC has already sent a letter to the border area administration to keep a watch, especially in the northern areas and Jessore. “We have requested the BGB (Border Guards Bangladesh) to look out for smugglers,” Ali added.
“At the land port of Jessore, thousands of trucks laden with tonnes of diesel leave for India every day, as our diesel is cheaper than theirs. We are trying to control that,” said an Energy Division official.
A BPC official said that in December 2017, the country used up 55 crore litres of diesel and 5 crore litres of furnace oil. This shows that every month, the BPC is making hundreds of crores of taka.
The BPC official said that in 2017, the country burnt 5.88 million tonnes of fuel, including 4 million tonnes of diesel, 0.8 million tonnes of furnace oil, and 170000 tonnes of kerosene. In 2018, BPC expects the total fuel consumption to go up to 6.10 million tonnes, including 4.20 million tonnes of diesel, 0.8 million tonnes of furnace oil, and 0.60 tonnes of kerosene.
As the BPC data shows, the government organization managed to make a profit of Tk. 4,208 crore in 2014-15, Tk. 7,753 crore in 2015-16 and Tk. 4,551 crore in 2016-17.
In 2013-14, the import bill was Tk. 35,925 crore and in 2016-17, the bill went down to Tk. 19,448 crore.
“Last January–February, 2017 the bill for 300,000 tonnes of consignment was USD 15 million. It has increased to USD 20 million now. This means the import bill could rise to Tk. 26,000 crore this year,” said a BPC official.
The Organization of Petroleum Exporting Countries (OPEC) data show that in November 1998, the crude oil price was USD 17.10 per barrel. In June 2008, the price was USD 157.73; in 2014, the price went down to USD 109. In January 2016, the price went further down to USD 29.64, and in December 2017, the price rose to USD 60.42 per barrel.
When this report was filed yesterday, the price showed an uptrend, as the crude price per barrel hit USD 63.41.
On the other hand, the inter-bank exchange rate stood at Tk. 82.75 per dollar, up from Tk. 82.70 a week earlier and Tk. 78.70 a year ago, according to the central bank.