An operational surplus of Taka 20 billion accrued from the steep oil price slump in the international market since June last year. It is a hefty sum for the state-run Bangladesh Petroleum Corporation (BPC). This has helped the government to reduce the pressure on the state coffer on account of subsidies to the BPC. Earlier the latter's massive operational gap between its receipts and expenditures widened over the past years when the oil prices in the international market were high -- and at times too high - compared with the 'administered' domestic prices. But the rationale behind confining the benefit of much lower oil prices in the global market now to such a single state agency is thoroughly self-defeating. This is particularly so in view of the on-going efforts by most countries to reap much wider benefits in their economies from the falling oil prices.
With the slump in global oil prices, adjustment of domestic prices of petroleum products is, ideally, the most rational thing to happen. But there is yet no sign in sight to indicate any move in this country in that direction. Apparently, the government has moved away from its earlier commitment to the International Monetary Fund (IMF) to adjust domestic prices of oil and petroleum, in keeping with the international oil prices. Such commitment apart, it is in the interest of the country that the government should have thought out how best to benefit from the falling prices. The BPC is, reportedly, enjoying now an operational surplus of Tk 13 to Tk 36 per litre on petroleum products.
This parastatal is one of the most heavily indebted agencies with its total debt amounting to Tk 34 billion to the state-owned banks. If the government was worried about the loan burden, it could have conveniently sought 'restructuring' of the loan through the central bank, as the latter had done so in case of a number of large private corporate borrowers. This would have enabled the government to offer a modicum of the benefits of lower oil prices to various segments of the economy. Understandably, the government is looking at how much it is saving on subsidies. This saving, in other words, operational surplus of the BPC should not have been its sole objective as this has restricted the benefit that could have otherwise been much widespread.
In the absence of any downward revision of domestic oil prices, the manufacturing sector of the country, largely dependent on oil-fired power generation, is counting heavily on high cost of production. This is severely affecting its competitive edge in the global market. Improved performance of the industrial sector, as a result of the falling oil prices, would then have benefited the government from higher tax revenue. Balancing international prices with domestic retails would also have a beneficial impact on inflationary pressure. Most importantly, it would have substantially cut production cost in the agro-sector by way of easing irrigation at much lower fuel prices.
For a country like Bangladesh, subsidies to keep the domestic prices of petroleum products low in times of spiralling international prices is, quite understandably, unavoidable on many counts. This policy makes a proper economic use while not relegating the need for price adjustments to the backburner, particularly, in times of markedly lower international prices. Market forces should in such cases be given a reasonable scope to play their part. Since there is no forecast of rise in oil prices in the near future, there is still time for the authorities concerned to consider downward adjustment of prices of petroleum products in the domestic market.
