More than half of the power sector has been privatised over the last one and a half decade. Private companies have been given permission to import liquefied natural gas (LNG). After that, the then government developed a policy for selling fuel oil in the private sector for the first time only for the benefit of a specific company.
The Awami League government fell in the face of a mass uprising of students and people on 5 August. Before that, on 10 June, Bangladesh Petroleum Corporation (BPC) received a letter from the Energy and Mineral Resources Division. The letter read that the Bashundhara Oil and Gas Company has been given permission for importing unrefined fuel oil and storing, transporting and selling it after refining under their own arrangements.
At the moment, only the BPC has approval to import and distribute fuel oil. Experts and consumer rights activists say people will have to pay more if the fuel oil business is privatised. This happened in the power sector. Fuel oil is a "strategic" product. Therefore, the whole business should be in the government’s hands.
The BPC sent a letter to Bashundhara informing them about the permission given by the energy division to sell fuel oil on 18 July. The letter also asked for a written commitment on a non-judicial stamp and its plans for developing its own distribution system with 388 filling stations. However, Bashundhar is yet to submit the work plan.
Bashundhara hasn’t submitted any work plan till now. So there hasn’t been any progress in this regard. However, the policy of selling fuel oil in the private sector has not been cancelled. BPC will move forward if Bashundhara submits the work plan as per the instructions of the energy division in this regardMd Amin Ul Ahsan, chairman, BPC
Two reliable BPC officials preferring to be unnamed told Prothom Alo BPC did not support the idea of permitting the private sector to sell fuel oil. Therefore, the government agency had made negative recommendations in this regard to the energy division right from the start. It was delayed several times in phases over the last seven years.
BPC acknowledged Bashundhara about the permission after more than a month of receiving the letter from the energy division. Now BPC is awaiting the decision of the new government.
The energy division mentioned 37 conditions in the letter of approval and said the approval can be cancelled without any prior notice if any of these conditions was not met. The conditions include reaching an agreement with the BPC over running operations and selling oil, paying BPC a security deposit, selling 60 per cent of the produced oil to BPC and 40 per cent under own distribution arrangements in the first three years, keeping an option to sell up to 50 per cent of the produced oil to the BPC for the next two years.
According to the conditions set by the energy divisions, BPC will always be the authority in fixing fuel oil prices and the company will be able to export oil only if there is no demand from the BPC or if the government agency doesn’t have any complaints.
The conditions further includes, Bashundhara can appoint 388 filling stations or distributors across the country to sell oil under their own arrangement. They will also be allowed to appoint CNG and LPG stations which don’t have the approval to sell oil.
The experience in the private sector is quite disappointing. It’s hard to control prices when the tendency is to make maximum benefits. The government should keep the fuel oil market in its own hands. It should not be privatisedM Shamsul Alam, Energy Advisor, CAB
Speaking to Prothom Alo, BPC chairman Md Amin Ul Ahsan said, “Bashundhara hasn’t submitted any work plan till now. So there hasn’t been any further progress in this regard. However, the policy of selling fuel oil in the private sector has not been cancelled. The BPC will move forward if Bashundhara submits the work plan as per the instructions of the energy division in this regard."
Policy developed for Bashundhara
Any applicant from the private sector seeking approval to sell fuel oil must have a refinery with the ability to refine at least 1.5 tonnes of fuel oil a year. Besides, the company must have the ability to stock at least 200,000 tonnes of oil.
Speaking to Prothom Alo on condition of anonymity, a BPC official said the ‘Establishment of Refineries at Private Level, Storage, Processing, Transportation and Marketing of Crude Oil Imported Policy-2023’ was prepared mainly to give Bashundhara the permission. No company other than Bashundhara had applied for it.
The petrol pump owners are saying that the private companies can destroy the market by selling fuel oil at a low price initially. And when the price rises in the global market, they will put pressure to raise the price by stockpiling. At the moment, it’s easy to control prices as the sector is still under government control
Bitumen production from the refinery of Bashundhara in Dhaka’s Keraniganj started in 2019. Bitumen is used for road construction. Apart from bitumen, the refinery also produces diesel, furnace oil and naphtha. The Bashundhara also had plans to construct a refinery in Chattogram.
BPC sources say Bashundhara got the approval to construct plants for producing bitumen on 15 June 2016. After that, the company appealed on 6 September 2017 seeking permission to sell fuel oil under its own arrangement. The BPC sent negative recommendations in this regard in October that year.
A high level committee was formed following directives from the energy division. That committee recommended selling the oil produced by Bashundhara to the BPC. Bashundhara appealed again in July 2020. Later, they were given approval for selling the bitumen and diesel they produce directly to the customers. They also got permission from the BPC to sell furnace oil and naphtha in the market.
If Bashundhara starts selling oil directly in the market, then their main competitor will be the BPC. The experts and BPC officials fear that the government agency will be in crisis as the private sector will reduce the price once it gets the approval to directly sell oil in the market. At one point, they will take control of the oil market and will raise the price exponentially
According to official documents, failing to secure permission from the energy division to sell oil, Bashundhara appealed to Tawfiq-e-Elahi Chowdhury, energy and mineral resources advisor to the then prime minister, on 31 March 2022.
Following that, the Energy and Mineral Resources Division sought BPC’s opinion in this regard again in June that year. The BPC recommended for giving the approval to import and distribute fuel oil on a limited scale. After that, the BPC and the energy division exchanged letters in phases regarding legislation of a policy in this regard. Later, on 11 June last year, a notification was issued on the policy.
In November that year, the Bashundhara Group appealed again seeking permission to sell fuel oil. They got the approval in June this year.
Asked about this, Bashundhara Group press and media advisor Mohammad Abu Taiyab told Prothom Alo that he didn’t know about this. Bashundhara Group executive director Maksudur Rahman looks after the business of Bashundhara Oil and Gas.
This correspondent tried to reach Maksudur Rahman over the phone, but he didn’t respond. He didn’t respond to the Whatsapp texts either.
Energy security under threat
If Bashundhara starts selling oil directly in the market, then their main competitor will be BPC. Experts and BPC officials fear that the government agency will be in crisis as the private sector will reduce the price once it gets the approval to directly sell oil in the market. At one point, they will take control of the oil market and will raise the price exponentially. At the moment, a state-owned company fixes the price considering the interest of the people. However, the private sector focuses only on profit.
They referred to the LPG in this regard. They say the private companies now control the LPG sector. Although the LPG-prices are set by the government, nobody follows that. And it is the customers who pay the additional costs. The government has to spend a lot for capacity charges in the power sector. As a result, electricity prices soared.
The petrol pump owners are saying that the private companies can destroy the market by selling fuel oil at a low price initially. And when the price rises in the global market, they will put pressure to raise the price by stockpiling. At the moment, it’s easy to control prices as the sector is still under government control.
The country’s annual demand for fuel oil is nearly 7 million tonnes. State owned company Eastern Refinery Limited refines 1.5 million tonnes of fuel oil. The remaining is imported in refined state.
The demand for fuel oil is rising every year. The demand could exceed 8 million tonnes by the 2026-27 fiscal. The cost remains low if the fuel oil is imported unrefined and gets refined inside the country. So a project named ERL-2 was proposed to construct a factory with the ability to refine 3 million tonnes of crude fuel oil. However, the proposal didn’t get the government approval even after 12 years.
Consumers Association of Bangladesh (CAB) energy advisor M Shamsul Alam told Prothom Alo, “The experience in the private sector is quite disappointing. It’s hard to control prices when the tendency is to make maximum profits. The government should keep the fuel oil market in its own hands. It should not be privatised. Therefore, the approval for Bashundhara must be cancelled immediately.”
*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu