BPC charges higher prices for furnace oil and diesel

The higher purchase cost of petroleum products by state-owned Bangladesh Power Development Board (BPDB) from another state-owned Bangladesh Petroleum Corporation (BPC) is increasing the country's overall electricity generation costs, sources said Thursday.
The BPDB is purchasing furnace oil from the BPC at Tk 60 per litre, much higher than the import cost and is supplying it to the power generation companies to generate electricity. This ultimately pushes up the electricity generation costs, they said.
The BPDB has also been purchasing diesel at higher rates.
The BPC's import cost of furnace oil is Tk 41.92 per litre after paying value-added tax (VAT) and relevant import duties, according to international petroleum price as on December 1, 2014, a senior BPC official told the FE.
The state-run corporation pays around Tk 8.30 per litre as VAT and import duty for furnace oil, he said.
Had the VAT and import duties been waived from the BPC, the import cost of every litre of furnace oil would have been around Tk 32 per litre, 46.66 per cent lower than the current price.
The country's lone electricity buyer from the generation companies, BPDB, is purchasing diesel from the BPC at Tk 68 per litre, about Tk 3 higher than the imported cost.
"We are purchasing petroleum products from the BPC at higher prices in line with the decision from the government," BPDB Chairman Md Abduhu Ruhullah told the FE Thursday.
He said the BPDB will write to the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) to reduce the purchase cost of petroleum products, he said.
The sharp fall in the prices of petroleum products in international market has reduced the import bill of the corporation significantly, BPC Chairman Md Eunusur Rahman told the FE.
The BPC's import cost of diesel fell by 31 per cent to $82 per barrel recently from $119 per barrel as of July, said a senior BPC official.
Its import cost of furnace oil slumped by 31.40 per cent to $413 per tonne recently from $602 per tonne in July, he said.
"We are making profit of around Tk 16 per litre against sale of furnace oil," the BPC Chairman said.
The corporation is making profit of around Tk 2-3 per litre against its diesel sales, he added.
The BPC imports around 1.0 million tonne of furnace oil from international market and sells it to the BPDB for electricity generation in oil-fired power plants.
It imports around 3.0 million tonne of diesel per year on an average to meet mounting local demand including those in oil-fired power plants.
Taking advantage of the oil price slump in the international market, coupled with VAT and tax waiver facilities by the National Board of Revenue (NBR), the import cost of furnace oil by the private sector currently stands at Tk 30 per litre, said sources.
Currently, the country has a total of 39 oil-fired power plants. Of these, 11 are diesel-fired and 28 are furnace oil- fired.
Their electricity generation capacity is 2,987 megawatts (MW) in total of which 2,133 MW is furnace-oil fired and 854 MW is diesel-fired.
Despite lower import costs of petroleum products, the BPDB along with other state-run electricity distribution companies has sought further hike in electricity prices.
They have submitted proposals separately to the Bangladesh Energy Regulatory Commission (BERC) to hike retail electricity tariff ranging from 14.75 per cent to 18.50 per cent.
The BPDB has sought a hike of electricity tariff at bulk level by 18.12 per cent or Tk 0.81 per unit (1 kilowatt hour).
The energy regulator is scrutinising proposals before inviting them for public hearings for raising electricity tariffs to the user-ends, a senior official said.
    azizjst@yahoo.com