The Energy Division has sought Tk 10.0 billion as subsidy for import of oil for six months in July- December, 2013.
The Energy Division Secretary sought the amount from Finance Minister AMA Muhith in a letter sent last week to the ministry, sources said.
According to the letter, the division informed the Finance Ministry that the Energy Division required US$5.0 billion for the fiscal year 2013-14 as fuel cost, of which $1.0 billion would be required for payment as subsidy.
The government has set the amount of Tk 28.75 billion as target for fuel subsidy in the current fiscal year (FY). It has also set 5.3 million litres as target of fuel demand for the current FY.
The Bangladesh Petroleum Corporation (BPC) has incurred a loss to the tune of Tk 9.20 for each litre of diesel, and Tk 10 for each litre of kerosene. BPC has received Tk 27 billion as fuel subsidy in FY 2012-13. The fuel subsidy amounted to Tk 125.50 billion for 2011-12 fiscal year.
The government on January 3, 2013, raised the petroleum prices with effect from January 4, the second time after December 30, 2011, aiming to reduce fuel subsidy.
Currently diesel and kerosene are selling at Tk 68 per litre, while octane and petrol at Tk 99 and Tk 96 per litre respectively. The petroleum prices were last raised in November, 2011.
According to the energy division's letter, if the Finance Ministry does not release the fund immediately, it will result in the disruption of smooth supply of fuel.
The government took loan worth $2.6 billion from Islamic Development Bank (IDB) in FY 2011-12. The government has already taken $2.2 billion loan from IDB for fuel import in the current fiscal year.
However, the International Monetary Fund (IMF) had placed a set of conditions in releasing subsidy for fuel import and suggested reducing loans for the purpose coming from international sources.
According to the IMF condition, the government should lower the foreign funding for fuel import to $775 million by next fiscal year against the present FY's borrowing worth $2.2 billion.
The IMF had prescribed the government to adjust the fuel cost, but the government is not interested in hiking fuel cost during the election year.
BPC, the country's lone oil importer and distributor, buys oil products from global markets at higher prices than those set on the domestic market, forcing the government to pay hefty subsidies to cover the difference.
Bangladesh's demand for fuel is growing sharply as a shortfall of natural gas has forced it to turn to costly oil-fired power plants to resolve the crippling electricity shortages.
Energy subsidies constitute a large share of government expenditure in Bangladesh. Bangladesh started subsidising the retail prices of energy products in the post-independence period. Today, with soaring global prices and rapidly rising demand for fuels, these subsidies take a heavy toll on government finances.
