Fall in global oil prices helps cut govt subsidy

Jasim Uddin Haroon | Published: December 04, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

A fall in global petroleum prices has helped cut the government's subsidy payment on account of marketing the fuel oil in domestic market.
The state-owned BPC (Bangladesh Petroleum Corporation) is unlikely to seek subsidies for payment of fuel bill immediately, official sources said.
A lower bill for imported oil is also benefiting the trade account of Bangladesh.
The lone oil importing government organisation -- BPC -- took only Tk 6.0 billion set for the July-September quarter.
The total subsidy for the BPC was earmarked at Tk 24 billion for the entire fiscal year.
Sources at the BPC said they did not feel the need for any government support in terms of subsidy to pay oil bill over the last couple of months mainly due to the slide in the prices of oil in the international market.
The OPEC's decision on Thursday last to hold output steady prompted a new downward jolt to prices, at one point pushing the benchmark ICE January Brent price to a four-year low of US$71.25 a barrel.
Eunusur Rahman, Chairman of the BPC told the FE Wednesday: "For the time being, we don't need any subsidy support to foot the fuel bill."
Mr Rahman said: "We are unlikely to seek subsidy from the Finance Division immediately for import payment of fuel oils."
The BPC pays each month for petroleum import whatever the nature of payment is: deferred or cash.
Sources at the BPC said many petroleum products like jet fuel and kerosene have for the first time after a long time emerged as profitable products following cheaper procurement prices.
Earlier, the government had to provide subsidy to keep prices of the same affordable to the consumers.
The government had to pay at least Tk 7.0 a litre as subsidy for import of diesel.
They also said the price of diesel, the largest consumed petroleum product, is now almost the same with its international price following sharp slide in the prices of both crude and finished oils.
Prices of fuel, especially the crude, have fallen at least 40 per cent since mid-June last on the back of substantial production in the US shale and OPEC member-countries.
But the demand for energy has fallen in Europe and other continents against the backdrop of poor growth forecasts.
Mosleh Uddin, director (operations and planning) at the BPC said that they are getting profits on some products which were earlier losing ones.
He also said the BPC is now purchasing, below $90 a barrel, finished oil against above $110 before June.
Bangladesh imports more than 5.0 million tonnes of fuel oils, including 1.3 million tonnes of crude for the country's lone refinery-Eastern Refinery Ltd--in Chittagong.
More than 400,000 tonnes of oils, including 100,000 tonnes crude, arrive in the port each month.
Bangladesh mainly procures gas oil or diesel followed by furnace oil to feed expensive power plants.
As of Wednesday, the BPC had storage of 378,000 tonnes of diesel.
The BPC official said the BPC has limited storage capacity that will shoot up to 1.0 million tonnes at the end of December, 2014.
jasimharoon@yahoo.com