Govt to cut oil prices, finally

The government has decided to cut fuel prices in a month, as oil prices continue to remain low on the international market for nearly two years now.

The price of furnace oil would be reduced in a week, and a circular to this effect would be issued soon, Nasrul Hamid, state minister for power, energy and mineral resources, told The Daily Star yesterday.

An official at the ministry said its price would be slashed by Tk 15-16 a litre.

The price cut on other fuels such as diesel, petrol and octane would come within a month, said the official on condition of anonymity.

Diesel prices would be slashed by Tk 10-15 a litre. And the prices of petrol and octane would be brought down to a level that would allow the government to make a profit of Tk 20-25 a litre, said some other officials at the ministry.

The price of diesel and kerosene now stands at Tk 68 a litre, octane at Tk 99 and petrol at Tk 96.

An official of Bangladesh Petroleum Corporation (BPC) said there have been talks for around a week over the reduction of furnace oil price.

The demand for adjusting oil prices on the local market has been getting louder since mid-2014 when petroleum prices started falling on the global market.

Oil prices dropped to as low as $27.65 a barrel in January this year before rebounding recently to $40 a barrel, putting further pressure on the government to lower domestic fuel prices.

But the government has been defiant against adjusting the prices to allow the BPC to repay its loans and recoup the losses it had incurred between fiscal 1999-2000 and 2014-15.

Now that the state-run BPC has admitted that all its bank loans have been repaid and that it is counting profits, pressure is on the government to reduce fuel prices.

The BPC bucked its five-year losing streak last fiscal year, making a tidy profit of Tk 3,455 crore on the back of sliding global oil prices.

As oil prices on the international market took a freefall last June, both the World Bank and the International Monetary Fund pursued the government to deregulate domestic oil prices and introduce a system that makes automatic adjustments of oil prices in line with global market rates.

The finance ministry recently sought the energy ministry's opinion on readjusting oil prices.

In an effort to reduce its subsidy burden, the government last adjusted the prices by revising it upwards in January 2013, when oil prices hit $120 a barrel on the international market. 

Bangladesh consumes 35 lakh tonnes of diesel, 15 lakh tonnes of furnace oil and about four lakh tonnes of petrol and octane a year.

Talking to The Daily Star yesterday, Akbar Ali Khan, former adviser to a caretaker government, said it is the government's moral responsibility to reduce fuel prices on the local market, as the prices already went down on the global market.

A reduction in oil prices would bring benefits to the economy as well as the consumers, said the analyst.