Automated fuel pricing at last

The government has at last introduced the automated fuel pricing mechanism that will see the domestic fuel prices adjust in line with the prices in the international market every month.

The prices of fuel oils will be calculated based on the international market price, the exchange rate, customs duties, the Bangladesh Petroleum Corporation's profit margin, transport costs and others, as per the gazette issued by the power division last night.

The fuel price will be announced for consumers every month, said Nasrul Hamid, the state minister for power, energy and mineral resources, while introducing the new system yesterday.

The automated and periodic pricing system, introduced at the behest of the International Monetary Fund, will help overcome the harmful effects of price adjustments made over long periods of time and ensure fuel pricing at market rates, the guideline said.

The method will also lower the subsidy demand, according to the IMF.

Meanwhile, the government yesterday said that the power tariff hike will take effect from February instead of March as previously announced, meaning the consumers will need to pay the bill for the outgoing month following the new rate.

The decision to bring forward the power tariff hike was announced yesterday by Hamid.

Just a day earlier -- and two days after the price of gas supplied to power plants were hiked by Tk 0.75 per cubic metre -- Hamid unveiled a new electricity tariff that will see the charges for retail users will go up by 8.5 percent on an average and for wholesalers by 5 percent.

With new rate, a consumer who previously paid Tk 1,000 a month will have to pay Tk 1,085 for the same volume of electricity, according to the notification from the ministry of power, energy and mineral resources.

The electricity tariff hike comes at a time when people are already battling with elevated inflation levels.

"The power prices will have to be increased as the government has to bear a good amount of subsidy to import fuel. This is because of the higher price of the dollar as the taka has weakened against it," Hamid said when announcing the tariff hike on Monday.

When coal power plants were introduced, the US dollar traded at Tk 80. Now the cost of the dollar is over Tk 110, Hamid said.

Nearly 1.40 crore customers pay Tk 4 for per unit of electricity usage. Customers who use higher units will pay Tk 7 per unit of electricity.

But, the average generation cost of electricity is Tk 12 per unit, Hamid said.

The government has to bear the rest of the cost from the public exchequer, he said, adding that the amount of subsidy for electricity would be around Tk 43,000 crore in the current fiscal year.

In the case of petroleum, the total subsidy requirement would be nearly Tk 6,500 crore.