Falling taka takes the blame

FE ReportThe depreciation of Bangladesh Taka (BDT) against US dollar coupled with surging oil prices in the international market has prompted the government to raise the prices of petroleum products again on Friday, a top government official said. Diesel, kerosene, petrol, octane and furnace oil are now costlier by Tk 5.0 a litre each as the government raised the petroleum prices through an executive order from midnight Thursday, said the official. The new the prices of per litre of diesel and kerosene is Tk 61, petrol Tk 91, octane Tk 94 and furnace oil Tk 60. This is the fourth hike of petroleum prices during the outgoing calendar year and third of the current fiscal year (FY 2011-12). Since May, 2011 the government has increased the retail prices of diesel, kerosene, petrol and octane by Tk 15 per litre and furnace oil by Tk 18 per litre. Despite the latest hike, Bangladesh Petroleum Corporation (BPC) will incur an estimated loss of Tk 17-18 per litre on the sale of diesel and kerosene and Tk 10 per litre on furnace oil, BPC Chairman Md Abubakar Siddique told the FE Friday. Surging oil prices in the international market coupled with a sharp depreciation in the taka's value against the US dollar have escalated BPC's losses recently, Siddique said. As the impact of Taka depreciation alone, BPC is incurring more losses than what it had suffered before the previous price hike in petro leum products of November 11, he added. BDT has depreciated by 10.78 per cent since the November hike, but the government raised petroleum prices within the range between 5.62 and 9.09 per cent this time, he said. The US dollar was quoted at Tk 81.95-Tk 81.99 in the inter-bank foreign exchange market on December 29, the last working day of the outgoing calendar year, against Tk 74 on November 11. The price hike will affect farmers less as the government plans to give them cash subsidy for diesel to be used for irrigation purposes, said an energy ministry official. But the hike might push up prices of food and transportation at a time when inflation is at double digits, he expressed the fear. Rise in transport fares might increase the already high commodity prices as a consequence, he added. Officials said multilateral donor agencies including International Monetary Fund (IMF) and World Bank (WB) have long been suggesting that the government should adjust the prices of petroleum products in line with the prices in the international market. In November, BPC had projected that it would require Tk 110 billion ($ 1.3 billion) from the government in FY 2011-12 to continue importing oil products from international markets and selling the same at lower prices domestically. Earlier in June, BPC had projected that it would need Tk 460 billion in FY 2011-12, up 53 per cent year on year, to import 6.5 million tonnes of petroleum products. In FY 2010-11, BPC imported 5.1 million tonnes of oil products and in FY 2009-10, it imported 3.75 million tonnes. The country's petroleum demand has risen sharply following the setting up of several fuel oil-fired power plants. A spike in the import bills has squeezed BPC's cash flow, leading it to buy fuel on a six-month deferred payment from Malaysia's state-owned Petronas and Philippines National Oil Company.