Need for revising oil prices

With the slump in global oil prices, it is quite unbecoming on the part of the government not to adjust its 'administered' domestic prices of petroleum products. But there is no sign in sight, as yet, to indicate any move to that direction. Apparently, the government has moved away from the commitment it made to the International Monetary Fund (IMF) to adjust domestic prices of oil and petroleum in keeping with the price trend in the global market. Such a commitment apart, it is in the interest of the country that the government should have thought out how best to benefit from the falling oil prices.

As a result of the declining oil prices, the gap between the domestic and international prices of diesel and furnace oil is around Tk 22 and Tk 32 respectively. The lone beneficiary in the country appears to be the

state-run Bangladesh Petroleum Corporation (BPC). This parastatal is reportedly making now profit of over Tk 11 and Tk 20 per litre from its sale of diesel and furnace oil in the domestic market. This is due to the considerable decline in BPC's import cost. A report published in this newspaper, quoting BPC sources, says that the corporation's diesel import cost fell by 41.17 per cent on January 02, 2015 compared with that in July 2014. Similarly, import cost of furnace oil also experienced a fall by around 34 per cent to $398 per tonne as on January 02, from $602 per tonne in July, 2014.

In view of the falling oil prices, BPC has reportedly set a target to import around 5.81 million tonnes of petroleum products this year, at a cost of around $5.0 billion. This, among other things, is purported to help the state corporation make up for the losses it incurred in the past despite hike in domestic prices and also to achieve the tax revenue target set by the National Board of Revenue (NBR). The question one cannot but face is: does the government consider BPC's profit or its achievement of NBR's target more important than the multiplier gains that would otherwise come from various segments of the economy in the prevailing scenario? Another question one must not miss is whether the government is going to continue with the staggering subsidy to the quick rented power plants-even in the changed circumstances!

Understandably, in the absence of any downward revision, the manufacturing sector of the country-largely dependent on oil-fired power generation-is counting heavily on cost of production. In the process, it is being severely affected in its competitive edge in the global market. Improved performance of the industrial sector as a result of lowering of oil prices will benefit the government from higher tax collection. Balancing international prices with domestic retails will have a beneficial impact on inflationary pressure as well. It will substantially cut production cost in the agro sector as well, by way of easing irrigation at much lower fuel prices. It is thus important that the authorities look at the issue from this perspective to be able to obtain an objective view of the situation, on the one hand, and try to make the best out of the advantage, on the other.