CA's office suggests review of fuel oil cost structure

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Shakhawat Hossain brThe Chief Adviser's Office (CAO) in a letter has asked the Ministry of Finance and the Energy Division to look into certain costs before fixing prices of petroleum products for the local market, ministry officials said Sunday.br'I suggest that you take the initiative to review the cost structure,' said a senior finance ministry official quoting the letter sent recently in the wake of a sharp fall in the oil price in the international market. brThe Chief Adviser gave the suggestion after finding that the state-owned Bangladesh Petroleum Corporation (BPC) adds some charges to the final prices for the consumers, the official added.brA number of charges are added to the CIF (cost, insurance and freight) costs of petroleum products at the consumers' end, said the letter. brThe charges include bank commission, insurance, handling commission and miscellaneous costs.brThese charges account for a significant amount of costs during price fixation and leave an extra burden on the general consumers, who are already hit hard by the record rise in fuel oil prices in the local market.brFuel prices were raised 34 per cent to 67 per cent in June, compared to the previous prices set when a barrel of oil cost US$60. brThe oil price rise has dealt a major blow to 40 per cent of the 144 million people surviving on less than a dollar a day. The point-to-point inflation crossed the double-digit mark again in June after staying at 7.4 per cent in May and at 7.6 per cent in April. brThe CAO has also asked the Energy Division to negotiate with banks, insurance companies and commission agents about reducing service charges so that general consumers might get some relief.brThe finance ministry has already asked the BPC to reassess its losses on import and marketing of the petroleum products as the oil prices have declined by around 25 per cent since July.brThe directive was given after the ministry said it expects a major cut in its losses and subsidies on sale of petroleum products. brFinance ministry officials said the reassessment of the BPC losses has become essential for proper utilisation of the budgetary allocation worth Tk 60.00 billion earmarked for oil subsidy in the current fiscal.brThe ministry made the budgetary allocation while the price of crude oil was hovering at $120 per barrel. brThe fuel oil prices have slid more than 25 per cent to be traded at around $107 from $147.27 of July 11.brThe ministry has already disbursed Tk 11.00 billion to the BPC to finance the country's oil import bill for the months of July and August. It is unlikely to make further disbursement for oil subsidy until the reassessment is made. brOn an average, Bangladesh needs to import 85,000 barrels of refined and crude oil a day.brIn the 2007-08 fiscal, the BPC spent around $3.1 billion to import 3.7 million tonnes of oil, about 75 per cent of which was refined diesel. The spending was at least $1.0 billion higher than that of the previous year.br