Whose profit is this, anyway?

Shamsul Huq Zahid | Published: August 12, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

Â 'Jakkher dhan takkhe khai' is a saying in Bengali often used to describe the fate of the assets belonging to the miserly people.
The literal meaning of the saying is that a kind of venomous lizard having suckers on its feet eats up wealth of extremely miserly persons.
The message is that the miserly persons can hardly enjoy the benefits of wealth amassed by depriving others of their due.
The saying seems to be true in the case of the Bangladesh Petroleum Corporation (BPC), the state-owned petroleum marketing entity.
The BPC earned a profit of Tk 30 billion in the immediate past fiscal (2014-15). The top management of the BPC -- the state-owned entity that had been incurring losses on account of oil market operation for 12 years in a row -- is relishing very much the latest profit-earning. And, apparently it is not in a mood to share its 'achievement' with anyone, not even the government.
The BPC can hardly take any credit for the 'achievement', in terms of profit-earning. It is the falling oil prices in the international market that has contributed to the offsetting of the substantial amount of losses that the BPC usually incurs on account of fuel oils marketing.
The prices of petroleum products were hiked at the consumers' level in January 2013 when the crude oil prices soared to $110 a barrel in the international market.
However, the crude oil prices started falling since then unabatedly and it is now being quoted at $45 a barrel.
The market forecast is that the commodity would not cross the $50 mark in the next one year's time.
The decline in oil prices has proved to be a boon to the BPC. It now earns a profit of Tk. 35 by selling a litre of octane or petrol. The profit earned from the sale of a litre of kerosene, diesel, furnace oil and jet fuel ranges between Tk. 14 and Tk. 20.
When the issue of reducing the domestic prices of fuel oils was raised to the policymakers and the BPC honchos, they appeared to be annoyed at the very idea. The policymakers argued that the government had provided heavy subsidies to fuel oils for years after years and it was time for the BPC to recoup, partially, the losses it had incurred over the years.
However, the same policymakers, while raising the domestic prices of fuel oils, had talked about the need for introducing an automatic price adjustment mechanism in the case of fuel oils and promised to bring down the prices in the event of any price-decline in the international market.
The irony is that the ministry of finance (MoF) has reportedly asked the BPC to refund partially the funds it had lent earlier to the latter. The ministry feels that the BPC, which is now making profit, is in a position to repay the money it had borrowed. The MoF says it had lent the BPC funds worth Tk 330 billion.
But the BPC, according to a newspaper report, feels otherwise. It says that the money that the MoF had paid to it was 'subsidy', not any sort of credit. So, the BPC is under no obligation to repay the money.
But the BPC's contention does not appear to be tenable for it is on record that the Finance Division lent Tk. 263.49 billion between the fiscal year (FY) 2007-08 and FY2014-15 at rates of interest ranging between 3.0 and 5.0 per cent. Moreover, the government had issued bonds worth Tk.172.28 billion against the BPC's loans with different commercial banks.
It is almost certain that the BPC would have to deposit with the government its surplus fund as a matter of rule.
The fund it has saved depriving the consumers of their due is unlikely to be with it for a longer period.
The falling oil prices have helped Bangladesh, like many other low-income oil importing countries, in stabilising its balance of payments (BoP) situation.
But the inflation situation would have eased further and poor consumers would have been benefited to some extent, had the BPC passed on, at least, partially, the gains from falling prices of fuel oils.
If not in the case of octane and petrol, some price relief against the marketing of diesel and kerosene would mean a lot for the farmers and the poor rural people.
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