After LPG, now BPC eyes increasing diesel price

Highlights

• BPC incurs losses of Tk21 crore a day
• Loss against 1 litre diesel is Tk13
• Diesel price hike may impact Boro irrigation
• Price to rise to Tk75 per litre, from Tk65 per litre
• 3.4 million hectares of land irrigated by diesel-run pumps

After the prices of Liquefied Petroleum Gas (LPG) and furnace oil were hiked at the beginning of this month, authorities concerned are now eyeing an increase in diesel prices in the local market to adjust operating losses following a price surge in the global market.

The Bangladesh Petroleum Corporation (BPC), the state-owned lone fuel importer, has already asked the Energy and Mineral Resources Division to adjust the diesel price at the retailer level.

The BPC aims to increase the price to Tk75 per litre from the current Tk65.

The current price was fixed in 2016 when the price of crude oil was $43 to $45 per barrel in the global market. The rate now has risen to $85.

"Due to this surge in the global market, the BPC has incurred losses of around Tk21 crore each day and Tk600 crore a month," said Syed Mehdi Hasan, BPC director for Operations and Planning.

"Therefore, we informed the Energy and Mineral Resource Division of the issue and urged for its direction," he said.  

The Ministry of Power, Energy and Mineral Resources, however, is yet to issue any directive.

Daily essential prices and livelihood costs will increase significantly if diesel price is hiked because agriculture and transportation sectors are largely dependent on the fuel, said Ghulam Rahman, chairmen of the Consumers Association of Bangladesh.

He said irrigation in the forthcoming Boro season may face a hurdle too because of a price hike.

Instead of increasing the price of fuel, he suggested stabilising the fuel market with the profits gained over the years when global oil prices were lower.

Earlier on 10 October, the Bangladesh Energy Regulatory Commission (BERC) increased the price of a 12kg LPG cylinder by Tk226 to Tk1,259.

It also increased the cooking gas price, adjusting for the massive hike of LPG's raw materials price in the international market.

On the other hand, the BPC increased the furnace oil price from Tk53 to Tk59 per litre on 8 October to adjust for the corporation's loss.

Furnace oil is largely consumed in both public and private power plants. Sources at the BPC said that despite the price hike, the corporation was still incurring a Tk5 loss in retailing per litre of furnace oil.

Along with the furnace oil price hike, the BPC also asked the ministry to increase the price of diesel and empower it in diesel price adjustment at a retail level.

At present, the BPC has the authority to adjust the prices of a few types of fuel including jet-1, furnace oil, marine fuel and bitumen.

Whereas, the Energy and Mineral Resources Division holds the power over major types of fuel such as diesel, petrol, octane and kerosene – that directly impact consumers.

Impact on bus fares, transportation costs

Buses, trucks and vessels on waterways are the biggest users of diesel fuel in the country.

In 2020-21, the sector consumed around 40 lakh tonnes of fuel, whereas the country's total consumption was 63 lakh tonnes.

Therefore, the transportation sector, including goods transportation, will be largely impacted by a jump in diesel prices.

Irrigation in the Boro season to become pricier 

On average, diesel demand during the irrigation season increases by five times in 16 districts in the northern regions.

Besides, diesel consumption also goes up in other parts of the country to run irrigation pumps.

Irrigation accounts for 43% of agriculture costs.

There are 13.4 lakh diesel-run irrigation pumps across the country for 34 lakh hectares of land, according to the Sustainable and Renewable Energy Development Authority data.

A total of 9.72 lakh tonnes of diesel oil was sold in the five irrigation months in 2020-21, which was 21.15% of the country's total diesel consumption.