It’s time to recoup BPC losses, nothing else!

The government, as the recent developments suggest, is hardly following a rational approach to the pricing of petroleum products in the context of fluctuations in prices of the same in the international market.
The government, had undeniably been spending until recently a substantial amount of money annually to subsidise the fuel oil prices with a view to neutralising, to a limited extent, the impact of the rise in oil prices on the consumers.
But still there were hikes in domestic oil prices on a number of occasions since 2008 when international prices of the same had gone through the roof. Being aware of the fact that the price hike would not go well with the people, the government policymakers concerned had promised to adjust downward the domestic prices if and when the international prices recorded a decline.
The international oil prices have declined to a record low in five years helping the state-owned oil marketing entity, the Bangladesh Petroleum Corporation (BPC), to earn now a profit for the first time in last 14 years. The corporation is thus expected to earn a respectable amount of profit during the current fiscal year (FY), 2014-15.
Viewed in this context, it was quite natural for the newsmen to seek to know from the government policymakers whether there would be a cut in domestic oil prices. The reply, however, did not match well with the promise the policymakers had earlier made.
The government has clarified that it does not have any immediate plan to lower fuel oil prices since it is willing to recoup the earlier losses incurred by the BPC on account of oil marketing.
However, it was not made clear whether the government would continue to recover the loss suffered by the BPC since its inception. If the intention was to recover the entire amount of loss, it would take years to adjust the same.
The multilateral donors, the World Bank in particular, have suggested, time and again, the introduction of an automatic price adjustment policy for domestic marketing of fuel oils. But the government has always been lukewarm to the proposition. The popular perception about the government's indifference to the suggestion has been that the policymakers are very much willing to give some relief to the general consumers, in terms of prices of fuel oils.
However, the government did increase the fuel oil prices, though the extent of the increase had always been lower than what the prevailing international prices dictated. Even the limited hikes had created dissatisfaction among the consumers. Such a response is always natural on the part of consumers. Consumers of even the affluent countries do not like the hike in the prices of essentials. The consumers' disliking for price-hike is rather strong in the case of poor and low-income countries.
Going by the developments in fuel oil prices in the domestic market, one might get the feeling that the government is listening to the donors' advice, to some extent, as far as the upward adjustment of fuel oil prices is concerned. But when the international market dictates a cut in the prices of the products in the domestic market, the government is even ready to renege on the promises made beforehand.
Besides, there is a catch in the estimate of subsidy on account of the government's oil marketing operation. For instance, the BPC incurred the highest amount of loss - Tk 105.05 billion in FY 2011-12. That amount was subsidised by the government. But in the same fiscal the BPC paid nearly Tk 47 billion to the national exchequer in duties and taxes. The amount, as a matter accounting principles, was added to the cost of fuel oil imports. The burden of duties and taxes, however, was shifted to the consumers. Had the amount received as duties and taxes been adjusted, then the amount of government's subsidy would have been far less.
Moreover, a substantial part of the fuel oils, diesel and furnace oil in particular, are consumed by the rental power plants. The government makes available fuel oils to these power plants at subsidised prices, buys power at very high rates from them and ultimately passes the subsidy burden on to the people.
Inefficiencies and financial irregularities are galore in the whole process of procurement and sale of fuel oils by the BPC. The general consumers are made to bear the cost involved in those.
The decontrol of oil marketing operations and involvement of the private sector might instead prove more rewarding for the consumers. The private operators would naturally follow normal marketing rules while selling fuel oils to the consumers. Without all the loopholes generally witnessed in the public sector operations, the cost of marketing on the part of private sector is likely to be lower than what is it now. But the idea in all probability will be dismissed instantly at the appropriate levels.
[email protected]