Specific duty on crude oil imports a welcome move
Oil refiners in Bangladesh have welcomed the government's specific duty proposed in the budget for the next fiscal year on the imports of crude oil.
"We welcome the fact that the proposed budget has kept the specific duty," said Subir Kumar Ghose, chief executive officer of Partex Petro Ltd.
The government has proposed an import duty of Tk 1,117 per barrel for base oil in 2023-24, beginning on July 1.
Currently, the duty stands at 5 per cent on the import price of crude oil, meaning the cost for importers goes up if the price climbs in the global market and vice versa.
Located in Chattogram, Partex Petro processes a wide variety of petroleum products from imported as well as local condensate and supplies the finished products to the Bangladesh Petroleum Corporation (BPC).
Ghose said due to a lack of clarity about the duty in the outgoing fiscal year, companies, including BPC, have faced losses.
Ghose shared his thoughts on the proposed budget during an interview with The Daily Star recently.
"Energy is a price-sensitive commodity, so the government should be careful about it because if the price of fuel increases, the price of allied products as well as those that use the fuel also goes up overnight," he said.
According to him, naphtha should see the same duty that the raw materials such as crude oil and condensate face.
Naphtha is a highly flammable liquid hydrocarbon mixture used chiefly as solvents and diluents and as raw materials for conversion to gasoline.
The CEO also touched upon the prevailing business situation in Bangladesh.
"The dollar crisis is the main reason for the ongoing economic and business slowdown in Bangladesh."
If letters of credit (LCs) can't be opened smoothly due to the crisis, it will have a negative impact on business and import and export trade, he said.
Owing to the US dollar shortage, importers are struggling to open LCs to bring in raw materials and equipment. A lower import might help stop the erosion of the foreign currency reserve, but the economy may slow down if manufacturing output declines because of a shortage of inputs and equipment.
Ghose thinks oil refinery companies can play a major role in saving dollars.
Between April and June this year, local refiners helped the country save about $180 million by refining crude oil in Bangladesh, he said, adding that Partex Petro alone helped save $90 million.
Had the government imported the products that refiners brought in, it would have had to spend $90 million to $100 million from its reserves in the last three months.
In Bangladesh, private refiners import crude petroleum products to produce octane, petrol, diesel and jet fuel and supply the finished goods to the BPC since they are not allowed to sell the finished products directly in the market.
Ghose alleged that BPC pays local refiners 1 per cent less than the rate the state-run agency pays for its imports from the global markets.
He said the proposed budget does not provide any benefit to the oil refinery sector.
"The government should provide some incentives to the sector since we are helping the country directly. If the government extends some benefits to us, we will be able to help ease the dollar crunch and cut the subsidy burden in the energy sector."
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