The government is reneging on its commitment made to the International Monetary Fund (IMF) by not revising downward the domestic oil prices in line with the fall in prices of the same in the international market, industry insiders said.
"It had committed to the IMF to make upward or downward revision in the event of rise or fall in international prices of petroleum products more than Tk 10 per litre," a senior official of the Ministry of Finance told the FE.
In line with the commitment, the government is supposed to adjust the domestic petroleum prices to closely reflect international oil prices, he added.
But the government is yet to make any cut in petroleum prices in the domestic market despite the drastic fall in international oil prices.
The government had made a set of commitments including carrying out a few reforms in domestic oil prices under its deal with the IMF for release of US$982.5 million under the Extended Credit Facility (ECF).
Officials said, the Brent crude, the major trading classification of sweet light crude oil that serves as a major benchmark price for oil worldwide, slumped by over 50 per cent to below US$60 per barrel last week to its lowest level since 2009.
The slump in oil prices has widened the gap between domestic and international prices of diesel and furnace oil by around Tk 22 and Tk 32 respectively from the level the government last raised the petroleum prices in January 2013, said a senior official.
State-run Bangladesh Petroleum Corporation (BPC) is making profit of over Tk 11 per litre against its sale of diesel and Tk 20 against its sale of furnace oil in domestic market, a senior BPC official said
The BPC's diesel import cost fell by 41.17 per cent to $70 per barrel as on January 2, from $119 per barrel in July 2014, said a senior BPC official.
The Corporation's furnace oil import cost slumped by 33.88 per cent to $398 per tonne as on January 2, from $602 per tonne in July, 2014, he added.
The BPC's import of diesel is more than half of total 5.40 million tonnes of petroleum products it bought in last calendar year.
The Corporation has been importing around 3.0-3.5 million tonnes of diesel per year on an average during the past several years to meet the mounting domestic demand.
The BPC also has been importing around 1.0 million tonnes of furnace oil per year from the international market. Furnace oil comprises the second highest quantity of petroleum products.
Prices of other petroleum products, including A-1 jet-fuel, kerosene, petrol and octane, also dropped significantly in the international market, he added.
The BPC has been making profit against sales of all petroleum products as their price in the international market fell sharply, BPC Chairman Md Eunusur Rahman told the FE Saturday.
The government raised the domestic prices of petroleum products up to 11.47 per cent with effect from January 4, 2013 through an executive order.
Currently diesel and kerosene cost Tk 68 per litre, petrol Tk 96 per litre, and octane Tk 99 per litre. Furnace oil is being sold at Tk 60 per litre.
Despite the hike, the BPC was then incurring an estimated loss of Tk 11.77 per litre on sale of diesel and Tk 12.15 per litre on kerosene and furnace oil.
The BPC chairman also said the Corporation has set a target to import around 5.81 million tonnes of petroleum products next year, up 7.50 per cent from the current calendar year, at a cost of around US$ 5.0 billion.
Of the total requirement, it has finalised contracts to import around 3.60 million tonnes of refined petroleum products from nine different suppliers of the Middle East and South East Asia.
The BPC has deals with the Kuwait Petroleum Corporation (KPC), the Petco -- the trading arm of Malaysia's Petronas, the Emirates National Oil Company (ENOC), the Philippines National Oil Company (PNOC), the PetroChina, the Unipec Singapore Ltd, Vietnam's Petrolimex, Indonesia's PT Bumi Siak Pusako, and Brunei's PB Trading to import refined petroleum products until December 2015.
It also expects to import around 1.40 million tonnes of crude oil from Saudi Arabia's Aramco and the Abu Dhabi National Oil Company throughout the year.
The BPC's oil import has been increasing steadily over the past several years to meet the rising local demand, especially for oil-fired power plants.
azizjst@yahoo.com
