Private power plants are now spending Tk 70 per liter on furnace oil while the same oil is being supplied by the Bangladesh Petroleum Corporation (BPC) at Tk 86 per liter.
As a result, the Power Development Board (PDB) has to pay an extra Tk 16 per liter.
The PDB purchases an average of 60,000 tonnes of furnace oil each month, resulting in additional costs of around Tk 960 million. On a yearly basis, this amount could exceed Tk 1 billion.
The BPC last set furnace oil prices on 2 August last year. Since then, even though global oil prices have fallen, the local price has not been adjusted.
According to BPC sources, in January this year, the global price of furnace oil was USD 486 per tonne, which has now dropped to USD 373 — a 23 per cent decline in 10 months, yet domestic prices remain unchanged.
Experts in the energy sector say that last year, the power sector received Tk 620 billion in subsidies. This year too, the PDB is struggling to manage electricity expenses. On one hand, the state-run BPC is making extra profit by selling oil to the PDB at higher prices; on the other, the government is unable to provide regular subsidies to another state agency, the PDB. As a result, the PDB is failing to make timely payments to power plants.
'This is an offence'
According to the agreement, the Power Development Board (PDB) arranges the supply of fuel oil to private power plants. If a power plant imports the oil on its own, the PDB reimburses the cost — including a 5 per cent service charge.
Sources in the Bangladesh Independent Power Producers’ Association (BIPPA) said that in January, they purchased furnace oil at Tk 85–87 per liter. Now, they are receiving an average of Tk 70 per liter from the PDB. A PDB official has also confirmed the price difference.
According to sources in the Power Development Board (PDB) and the Bangladesh Petroleum Corporation (BPC), last year the PDB purchased 867,512 tonnes of furnace oil from BPC. Up to September this year, it has taken 572,558 tonnes. This means that in the first nine months of the year, the PDB has purchased a total of 572.56 million liters of furnace oil — all at the higher price. Another 130 million liters are expected to be supplied in the remaining three months. If prices are not reduced, the PDB will have to pay an additional Tk 20.8 billion in just those three months.
M Shamsul Alam, energy adviser of the Consumers Association of Bangladesh (CAB), told Prothom Alo: “How can a state agency charge Tk 16 more per liter? This is a crime. Such looting deserves severe punishment. The Energy Division cannot avoid its responsibility either.”
BERC silent
The Bangladesh Energy Regulatory Commission (BERC) was established in 2003 as the regulatory authority for the power and energy sector. It is responsible for setting the prices of electricity, gas, and fuel oil through public hearings. However, because the regulations on fuel oil pricing have not been finalised, prices of octane, petrol, diesel, and kerosene are still determined by the Energy Division, while furnace oil prices are set by BPC.
After the change of government in September last year, the authority to determine furnace oil prices was officially transferred to BERC.
A responsible BERC official told Prothom Alo: “BPC does not have a BERC licence. Therefore, there is no legal scope to hold a public hearing based on their proposal.”
Officials at BPC said that the pricing authority was handed over to BERC just a month after BPC set the furnace oil price. As a result, BPC no longer has the authority to adjust prices. Although a proposal was submitted to BERC for price adjustment, no hearing has been held yet.