Alternative fuel-oil price mechanism shows promise

The Centre for Policy Dialogue (CPD) has recently shared findings of a study that proposes an Artificial Neural Network (ANN) based fuel-oil-pricing model. The model, if adopted and implemented correctly, promises to cut fuel prices by around 15 per cent, as it would lay the groundwork mechanism for effectively stopping pilferage, adjusting taxes, ensuring transparency in the supply chain and effectively preventing misappropriation. The study titled 'Market-based Fuel Pricing: Government-led Initiatives and Possible Revision' basically highlights the flaws in the current automated-pricing mechanism that has been in effect from March 2024 which does not address transparency issues. The ANN model is being touted as one that incorporates best international practices to usher in the issue of consumer affordability on the one hand and fiscal constraints that the State experiences on the other.

The study actually narrows in on the sticky issue of Bangladesh Petroleum Corporation's (BPC) not needing any state subsidy since 2015 as it has been earning super profits, all at the cost of the consumer. This is so because all added costs to the state-run institutions were effectively dumped on to bulk and retail consumers - a practice adopted and practiced by the previous regime. For too long, the only interest that concerned the government was the benefit of the state over those of the electorate. That was hardly surprising given the fact that elections were managed and the electorate had lost the power of the vote. Hence, consumers' interests took a back seat in the face of abnormal profits generated to benefit the state entities. That has to change now. As BPC has long moved beyond needing government largesse (subsidies), it is time to rationalize those profits so that some price benefits trickle down to consumers.

As pointed out by CPD: "The BPC is reconciling previous losses by increasing prices at an unreasonable rate for three years. International practice should be taken into account in determining the price of electricity and gas." This makes sense, and it is time to resurrect the Bangladesh Energy Regulatory Commission (BERC) and make it effective again. Previously, the BERC used to hold stakeholders' hearings whereby policymakers and state-run entities such as BPC and other utility companies had to defend their demand for raising the tariff. Regardless of the outcome, there was some form of transparency and accountability in the process. Revamping the BERC to be a wholly autonomous body -- a true watchdog that would have consumers' interest in its core mandate could ensure a system of checks-and-balances on the power of the Executive, which as experience has shown, would like to ramrod any price mechanism that benefits the State or a chosen few over-and-above the interests of the people. Since transparency and accountability are cornerstones of the present interim government, it would make sense to fast-track BERC draft regulations into law. Without consumer-interest groups having a say in fixing the price mechanism, there can be no transparency or accountability.

Costs can further be de-escalated if the storage capacity of BPC is enhanced. The whole idea of having a pricing regime that works for public benefit needs to be incorporated into fuel-pricing. Fuel prices are directly linked to agriculture production since fuel is needed for irrigation -- a thought that often eludes policymakers. The losses in the system that involves participation of errant officials in pilferage activities has never been properly dealt with. These are pertinent issues that contribute to losses -- which are simply passed on to consumers. Until the government in power recognizes these problems and acts proactively to rectify them, there will be no cost rationalization and no respite for consumers.