Govt to give maximum Tk 40b fuel subsidy to BPC annually
Sunday, 26 October 2008
M Azizur Rahman
The government will give fuel subsidy not more than Tk 40 billion annually to the state-owned Bangladesh Petroleum Corporation (BPC) to keep the domestic fuel price lower than that in the international market, official sources said Saturday.
The energy ministry in a recent meeting with the finance ministry decided that the government would continue providing fuel subsidy to this extent to help the poor coping with their mounting expenses.
"The domestic petroleum prices would be reduced by 8-12 per cent this week taking the subsidy issue into consideration," Energy Secretary Mohammad Mohsin told the FE Saturday.
He said the government had to provide subsidy of around Tk 120 billion to the BPC last year to import petroleum from the overheated international market.
The extent of price cut in local fuel prices would be commensurate with their rates in the neighbouring countries to discourage smuggling, the energy secretary said.
Currently diesel and kerosene are being sold at Tk 52 per litre in India.
As per the energy ministry's latest plan the prices of diesel and kerosene would be reduced to Tk 50 a litre from the existing Tk 55, petrol to Tk 78 a litre from the existing Tk 87 and octane to Tk 80 from the existing price of Tk 90 per litre, a senior official of the energy ministry said.
He said the formal announcement of this price cut would come shortly.
The government, for the first time in the country's history, is set to reduce the domestic fuel prices in line with a formula to rationalise the domestic oil prices in line with the fluctuating international market.
As per the formula oil prices would be adjusted in every three months, if needed, to cope with the prices in unpredictable international oil market.
The extent of oil price fluctuations in the global market would determine the timing for fuel price adjustment domestically.
The oil prices would be adjusted downward if the international price fell or be raised upward if it soared, the newly adopted formula spells out.
The government took the initiative to introduce the fuel pricing formula following directions from Chief Adviser Fakhruddin Ahmed when the international oil prices witnessed a massive slide from over US$ 147 a barrel in July last to below $100 a barrel in September last.
Crude oil prices reached as low as US$62.85 a barrel, the level below a year ago, on Friday last despite the Organisation of Petroleum Exporting Countries (OPEC) announced a 1.5 million barrels production cut a day in an attempt to halt the decline.
Crude prices have now fallen 56 per cent from the highs reached in July, and more than $41 per barrel in just the last 30 days.
The government in its latest raise hiked the petroleum prices substantially between 37.5 per cent and 41.79 per cent with effect from July 1 this year to offset the impact of overheated international oil market on the domestic economy.
The government will give fuel subsidy not more than Tk 40 billion annually to the state-owned Bangladesh Petroleum Corporation (BPC) to keep the domestic fuel price lower than that in the international market, official sources said Saturday.
The energy ministry in a recent meeting with the finance ministry decided that the government would continue providing fuel subsidy to this extent to help the poor coping with their mounting expenses.
"The domestic petroleum prices would be reduced by 8-12 per cent this week taking the subsidy issue into consideration," Energy Secretary Mohammad Mohsin told the FE Saturday.
He said the government had to provide subsidy of around Tk 120 billion to the BPC last year to import petroleum from the overheated international market.
The extent of price cut in local fuel prices would be commensurate with their rates in the neighbouring countries to discourage smuggling, the energy secretary said.
Currently diesel and kerosene are being sold at Tk 52 per litre in India.
As per the energy ministry's latest plan the prices of diesel and kerosene would be reduced to Tk 50 a litre from the existing Tk 55, petrol to Tk 78 a litre from the existing Tk 87 and octane to Tk 80 from the existing price of Tk 90 per litre, a senior official of the energy ministry said.
He said the formal announcement of this price cut would come shortly.
The government, for the first time in the country's history, is set to reduce the domestic fuel prices in line with a formula to rationalise the domestic oil prices in line with the fluctuating international market.
As per the formula oil prices would be adjusted in every three months, if needed, to cope with the prices in unpredictable international oil market.
The extent of oil price fluctuations in the global market would determine the timing for fuel price adjustment domestically.
The oil prices would be adjusted downward if the international price fell or be raised upward if it soared, the newly adopted formula spells out.
The government took the initiative to introduce the fuel pricing formula following directions from Chief Adviser Fakhruddin Ahmed when the international oil prices witnessed a massive slide from over US$ 147 a barrel in July last to below $100 a barrel in September last.
Crude oil prices reached as low as US$62.85 a barrel, the level below a year ago, on Friday last despite the Organisation of Petroleum Exporting Countries (OPEC) announced a 1.5 million barrels production cut a day in an attempt to halt the decline.
Crude prices have now fallen 56 per cent from the highs reached in July, and more than $41 per barrel in just the last 30 days.
The government in its latest raise hiked the petroleum prices substantially between 37.5 per cent and 41.79 per cent with effect from July 1 this year to offset the impact of overheated international oil market on the domestic economy.