Automatic fuel pricing: Octane, petrol prices to fall more than diesel

The government is going to introduce an automatic fuel pricing system to adjust fuel prices in light of global fuel prices.

A gazette is likely to be issued soon adjusting fuel price for March with diesel price likely to fall by Tk 4 a litre and octane and petrol prices by Tk 15 a litre.

Power Division sources said the state-owned Bangladesh Petroleum Corporation currently makes less profit on diesel sales, and yet, the government is mulling slashing the diesel price.

As per the automatic fuel pricing, diesel and kerosene prices may fall to Tk 105 a litre.

The price of kerosene, however, will be similar to diesel price in a bid to prevent fuel adulteration. While octane price may fall to 115 from Tk 130 a litre and petrol price to Tk 111 from Tk 125 a litre.

Recently, global fuel prices witnessed an uptrend. So, if the diesel price does not decrease, octane and petrol prices will fall because, as per the automatic pricing method, the price of octane per litre will be Tk 10 and Tk 4 higher than diesel and petrol prices respectively. As a result, if diesel price remains unchanged, octane and petrol prices will reduce by Tk 11 and Tk 10 a litre respectively.

The proposal on revised fuel price has been sent to the Prime Minister’s Office as prime minister Sheikh Hasina is the minister for power, energy and mineral resources. Once the proposal is approved, the gazette on revised price will be issued.

BPC always makes profits from petrol and octane prices. Seventy-five per cent of fuel oil used in the country is diesel, and the BPC has long been making profits from selling it.

State minister for power, energy and mineral resources Nasrul Hamid told Prothom Alo that automatic fuel pricing will be introduced this month and that might slash fuel prices, but it is yet to be finalized.

The BPC profited a whopping Tk 45.86 billion in the 2022-23 fiscal after raising fuel prices on the pretext of subsidy adjustment. The state-owned corporation also made a profit of over Tk 5 billion in the first half (July-December) of the current fiscal, 2023-24, but fuel prices have not been adjusted yet.

The automatic pricing is coming into effect six months after it was set to be introduced in September 2023. Experts said there were opportunities to slash fuel prices before.

The government released the Automatic Fuel Pricing Guidelines on 29 February detailing the price fixing mechanism. It said octane and petrol are considered luxury items since this gasoline is largely used in personal vehicles, which is why octane and petrol prices remain higher than diesel price.

The BPC is the lone fuel oil importer and distributor of the country. They regularly adjust the price of furnace oil used in power stations and jet fuel used in aircraft. The BPC profits from selling these two fuel oils all the time. However, the power division fixes the prices of diesel, petrol and octane by executive orders.

Fuel oil prices were raised by a record 42 per cent in August 2022, and it was slashed by a meagre 4.38 per cent or Tk 5 a litre in the wake of huge criticism. Since then, prices of diesel and kerosene have remained at Tk 109 a litre, petrol at Tk 125 a litre and octane at Tk 130 a litre.

At that time, the government revised fuel prices setting the global crude oil price at USD 139 per barrel (158.99 litres), but crude oil price fell below USD 70 at global markets in 2023. Currently, crude oil price is USD 83 per barrel in global markets. The government took the average of global crude oil prices between 21 January and 20 February into consideration to adjust the prices for March.

A fall in diesel price will also reduce the cost of bus and truck owners, as well as irrigation costs while slashing of octane and petrol prices will decrease the cost of car and motorcycle users. However, people will enjoy no benefits unless bus and truck fares fall, and good transportation costs will not fall either.

Former special assistant to the chief advisor of the caretaker government M Tamim told Prothom Alo that the government quit subsidising fuel oil permanently by introducing the regular price adjustment system.

"We have to be careful so that additional profits are not made," he added.

M Tamim said the new price-fixing formula is a complex one and if the price-fixing formula is released in several phases, people’s trust will increase.

If transportation cost is not adjusted in light of slashing diesel prices, the method will not yield any benefit, the former special assistant pointed out.

* This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna