Govt to cut furnace oil price to facilitate private power plants

The government is going to cut the price of furnace oil in the local market soon – in a bid to facilitate private power plants where the fuel is used mostly.

The price may go down by Tk8-9 – from the current price of Tk42 per litre.  

Anisur Rahman, senior secretary to the Energy and Mineral Resources Division, said the decision on price cut is likely to come this week. 

"A committee is working on fixing the reduced price, and I hope the decision will come in a day or two," he added.

The government is set to hand over the decision of adjusting the price of this product to the Bangladesh Petroleum Corporation (BPC), the state's lone petroleum importer.  

"BPC will be given the power to change the furnace oil price every month in the same way it has been adjusting the Jet A-1 price," said Anisur Rahman. 

He added that the government, however, has no plan right now to reduce the price of diesel – a common fuel used by public transportation vehicles and irrigation pumps. 

The price reduction move came after the BPC had set a condition on the private power producers to purchase around 10 percent of their total requirement from it – plus a budgetary proposal to impose import duties on the fuel.

Currently, private power producers import furnace oil – as per their demand upon an approval by the Bangladesh Power Development Board – without any import duty. 

The private sector imports around 32 lakh tonnes of furnace oil annually to generate around 4,500 megawatts of electricity. 

While the BPC imports around 5 lakh tonnes of furnace oil to generate electricity in the government's power plants.

The finance minister in the budget for the next fiscal year has proposed 12 percent import duty on furnace oil. In 2011, the government waived duty on import of the fuel.

Later, BPC moved to impose a condition on private importers to purchase around 10 percent of their total annual demand from it.

The leaders of the Bangladesh Independent Power Producers Association later sought a reduction in the price as it is much higher than their cost of the imported fuel. 

The current price of furnace oil of Tk42 per litre was fixed in March 2016. 

On the other hand, the import cost of furnace oil by the private sector is around Tk17 per litre, said private power plant owners. 

Currently, the price per litre of octane and petrol is Tk89 and Tk86, respectively, while the price is Tk65 for a litre of diesel and kerosene.