Fuel prices: Syncing with int’l markets may not begin in Sept

The plans to finalise a system to automatically synchronise domestic fuel prices with international ones from September may get delayed.

The system called dynamic fuel pricing makes local prices reflect fluctuations in the global market.

Implementation of a dynamic fuel pricing mechanism was one of the conditions set by the International Monetary Fund for its $4.7 billion loan.

Besides, many economists have long been recommending dynamic fuel pricing.

Finance Minister AHM Mustafa Kamal in his budget speech in June said officials were working to establish a system of formula-based price adjustment in the energy sector.

He expressed hopes that the formula would be finalised by September.

Bangladesh Petroleum Corporation (BPC), which submitted a formula to the energy ministry in July, is still waiting for the ministry's feedback.

BPC officials at a meeting at the ministry last week presented their recommendations that included a 10 percent profit margin for the BPC, said a ministry official, adding that the large margin of profit was not realistic at all.

Several BPC officials, however, told The Daily Star that profits would be necessary to fund BPC's development projects.

As per the draft formula, the BPC will make assessments of the international prices mentioned by the singapore-based S&P Global Commodity Insights and adjust local prices every three months.

According to a BPC official with knowledge of the proceedings, the local prices will be set in accordance with the three-month average of the international prices.

In addition, the official stated that local prices will reflect the average exchange rate of the dollar over three months, as well as premiums, shipping costs, import duties, banking fees, operational losses, storage costs, and the profit margins of distributors and refuelling stations.

The Daily Star has learnt that the formula was prepared after a delegation visited India, which introduced dynamic fuel pricing in 2017.

Some Indian states set fuel prices every day while others do it every month.

An official who was among the delegates, said the authorities were still discussing whether to adjust the local prices every quarter or every month.

Quarterly adjustments may sometimes put pressure on the consumers, officials said, adding that monthly adjustments will make it easier for the people, and rein in inflation.

A top official of the ministry told The Daily Star on Sunday that the government was trying to choose the right time to announce the dynamic pricing formula. "The prices have been rather high in the international market in the last three months, and the government will wait until the international prices fall."

Contacted, the BPC Chairman ABM Azad said dynamic fuel pricing was still in a preliminary stage.

"Nothing has been finalised. The decision will have to be made by the ministry," he said. "If the ministry asks us to introduce the formula today, we will. However, the government needs to think about all the implications and impacts of such a move."

Asked about the flags raised regarding the profit margin, he said the BPC had not made any proposal about its profit margin in writing.

Zakir Hossain, additional secretary of the energy division, who is leading a team working on the formula, told The Daily Star that the issue was "nearly finalised".

Asked if the formula will be implemented from September, he said, "We hope so."