How big is the fall in fuel oil prices? Who will benefit?

State Minister Nasrul hinted at “big changes” to fuel oil prices in line with the international market

The government has announced a reduction in diesel and kerosene prices by Tk 1.48 per litre, although consumers will see a price decrease of only Tk 0.75 per litre.

Octane price has been cut by Tk 4.58, but the customers will enjoy a Tk 4 decline. After Value Added Tax and other taxes, petrol is Tk 3.63 cheaper, yet the benefit to consumers is a decrease of Tk 3.

But before the new rates took effect on Friday, State Minister for Power, Energy and Mineral Resources Nasrul Hamid had hinted at “big changes” to fuel oil prices through automatic readjustment with the international market.

Titu, the driver of a small passenger vehicle called Laguna who gave a single name, said they were waiting for a long time for a drop in fuel oil prices.

“Now the prices have come down by only a few paisas. What’s the benefit for us in it?” he said.

“The refuelling stations charge us Tk 10-15 more. And those selling in containers have kept the rate unchanged at Tk 109.”

Another Laguna driver, Ashraf Hossain, said the drop may save him at best Tk 10 a day as long as he needs 15 litres of oil daily. “Talking about this means wasting time.”

Consumer rights advocates and energy experts argue that such minimal price reductions favour major businesses rather than the average consumer.

An analysis of the two notifications of the Ministry of Energy and Mineral Resources reveals that although the price for the consumer has been slightly reduced in the readjustment, the income per litre has been increased by Tk 0.73 through the margin and other fields for the marketing companies.

The profit margin of firms marketing diesel and kerosene has been increased by Tk 0.30 per litre from to Tk 0.80. The margin for petrol and octane is Tk 0.90 now, up by Tk 0.30.

The margin for a sector called Equal Transport Fare Fund Account has been increased by Tk 0.30 to Tk 1.20 per litre,

For BPC's fuel oil sector development fund account, the charge has been raised from Tk 0.10 per litre to Tk 0.25.

In case of diesel-kerosene, commission of dealers and agents has been reduced by Tk 0.02 per litre. They will now get a commission of Tk 2.97 per litre on diesel and Tk 2.10 on kerosene.

Dealers and agents’ commission has been reduced by Tk 0.17 per litre on octane and Tk 0.12 on petrol. They will get Tk 5.13 per litre on diesel sales and Tk 5.04 on petrol.

GOVERNMENT DOING BUSINESS?

In line with the dynamic pricing system, the price of diesel and kerosene fell Tk 0.75 to Tk 108.25 per litre on Friday. The price of petrol dropped Tk 3 to Tk 122 per litre, and the price of octane fell Tk 4 to Tk 126 per litre.

Mamunur Rashid, who shares motorcycle rides, said he needs 2 litres of fuel oil a day. “A Tk 3 fall means I’ll save Tk 6 a day. That’s the benefit I’ve got from the fall.”

“We’ve just launched the dynamic pricing system. We’re implementing a plan to include the storage, transportation, loading and unloading costs in the automatic pricing system,” State Minister Nasrul said when bdnews24.com contacted him for the report.

“If there are no changes in the international market, domestic prices are expected to fall further next year.”

Bangladesh consumed nearly 7.35 million tonnes of fuel oil, 68.24 percent of which was diesel and kerosene, in the 2022-23 fiscal year.

In March last year, over 402,000 tonnes of diesel were sold. The sales will be more than 423,000 tonnes this March, the Bangladesh Petroleum Corporation estimates.

It means the price cut will cause the BPC’s income to fall by Tk 317.5 million in March.

But the BPC and the three distributors – Padma, Meghna and Jamuna – have their profit margin and operation cost increased, which will earn them Tk 309 million extra. So, they will not lose revenue because of the fall.

Shamsul Alam, energy advisor to the Consumers Association of Bangladesh or CAB, He accused the government of violating the constitution by making profits from the energy sector.

“Government companies do not have the opportunity to act like commercial firms. They can’t make profit, but earn just to pay the expenses,” he said.

He also questioned the readjustment bypassing the Bangladesh Energy Regulatory Commission or BERC.

“How can they fix the prices on their own? The prices must be set through analysis by an independent body. We challenged the matter at the High Court, but they have fixed the prices when the case is being heard.”

BPC Chairman ABM Azad said the readjustment aimed to set a baseline for fuel oil prices so that they do not fluctuate much.

“The prices used to increase or fall by a large amount after a long time. The dynamic pricing system aims to get out of that situation. People might have thought that prices would decrease much, but the prices are set by adding VAT, taxes and other expenses to the prices in the international market,” he said. ?

He also said the BPC did not fix the prices alone, but in consultation with other agencies. “What has been done now is just the start. Prices will reach a stable level by adding and subtracting costs every month.

“It will send a wrong message if you compare the new readjustment to the old system.”