News Desk

The government has raised the prices of all four major petroleum products by Tk 20 per litre, transferring a significant portion of the rising import costs to consumers. The new prices, effective from midnight, take diesel to Tk 135 per litre from Tk 115, octane to Tk 165 from Tk 145, petrol to Tk 160 from Tk 140, and kerosene to Tk 155 from Tk 135.

The latest adjustment marks the third fuel price increase since the BNP-led government assumed office in February and pushes all four petroleum products to their highest-ever retail prices. It is also the largest increase since August 2022, when Bangladesh sharply raised fuel prices amid the global energy crisis that followed Russia’s invasion of Ukraine.

The increase comes as international petroleum prices and freight costs have risen substantially since March, putting severe financial pressure on the Bangladesh Petroleum Corporation (BPC), the state-owned agency responsible for importing and distributing petroleum products.

Diesel at the centre of the price increase

Diesel is particularly important to Bangladesh’s economy because it accounts for nearly two-thirds of the country’s total petroleum consumption. According to BPC data, Bangladesh consumes approximately 4.35 million tonnes of diesel annually, representing about 64 percent of total petroleum consumption.

Transport is the largest consumer of diesel, accounting for around 60 percent of total diesel use. Agriculture, particularly irrigation, consumes about 15 percent, while power generation accounts for roughly 10 percent and industries around 5 percent.

As a result, any significant increase in diesel prices can have consequences well beyond filling stations. Higher fuel costs can increase the expenses of transporting passengers and goods, operating factories, irrigating farmland and distributing consumer products.

The latest increase could therefore put additional pressure on the prices of food and other essential goods. The effects of the previous fuel price adjustment in April were already visible, with freight costs from Chattogram port increasing and businesses reporting higher distribution expenses. Some manufacturers absorbed the additional costs by reducing profit margins, while others increased prices or reduced product sizes.

BPC faces mounting financial pressure

The fuel price increase has come against the backdrop of growing losses at BPC. Between March and August, the corporation incurred losses of Tk 22,875 crore because of the sharp rise in international petroleum prices and associated import costs.

BPC has requested reimbursement of the losses through government subsidies. According to the Energy Division, before the latest price adjustment, BPC was losing approximately Tk 89 on every litre of diesel sold. This amounted to an estimated daily loss of Tk 109 crore, or nearly Tk 40,000 crore annually.

The government estimates that increasing fuel prices by Tk 20 per litre could reduce BPC’s annual losses by approximately Tk 10,000 crore.

However, the new retail prices still remain below the full import-linked costs calculated by BPC. For September, the corporation had proposed a diesel price of Tk 187 per litre, compared with the newly announced retail price of Tk 135. It had also proposed Tk 154 for octane, Tk 150 for petrol and Tk 146 for kerosene.

The difference indicates that the government is continuing to absorb part of the higher international cost rather than passing the entire burden on to consumers.

Concerns over fuel import financing

BPC has also warned that its financial position could threaten its ability to maintain fuel imports. Earlier this month, the corporation informed the Energy Division that its available funds could become insufficient to open letters of credit for fuel imports in October unless it received additional financing.

As of September 6, BPC reportedly had around Tk 12,368 crore in usable working capital. The amount was considered sufficient for September import payments but inadequate to maintain purchases in subsequent months without additional funds.

BPC estimated that it would need another Tk 15,000 crore to Tk 20,000 crore to maintain working capital equivalent to roughly two months of fuel imports.

The corporation has already redirected Tk 19,500 crore that had been allocated for the expansion of the Eastern Refinery and other development projects to help finance petroleum imports. This reflects the growing pressure created by higher international fuel prices and the country’s dependence on imported petroleum.

Bangladesh highly dependent on imported fuel

Bangladesh is particularly vulnerable to fluctuations in global energy markets because approximately 92 percent of its petroleum-fuel requirements are met through imports.

International crude oil prices have risen sharply in recent months. Brent crude has crossed the $100-per-barrel level, compared with around $72 before the conflict began on February 28, according to the figures cited by the government.

The Energy Division said the continuing conflict had pushed up both petroleum prices and freight charges. The government said it had previously avoided passing the entire increase on to domestic consumers, but maintaining the existing price gap had become increasingly difficult.

The government has also raised concerns about fuel smuggling across Bangladesh’s borders. Officials argued that comparatively low domestic diesel prices could encourage cross-border movement of fuel, particularly when prices in neighbouring countries are higher.

The ministry cited diesel prices of Tk 134.76 per litre in Kolkata, Tk 164.83 in Myanmar, Tk 161.24 in Nepal, Tk 179.42 in Sri Lanka and Tk 185.48 in Pakistan.

Potential impact on consumers and the economy

The immediate impact of the new prices will be felt at petrol pumps, but the broader economic effects could take time to emerge. Diesel is closely connected to transportation, agriculture, electricity generation and industrial production. Higher diesel costs can therefore increase operating expenses throughout the supply chain.

Transport operators may face higher fuel bills, while farmers could see increased irrigation costs. Manufacturers and distributors may also face additional expenses for moving raw materials and finished products.

The previous adjustment in April offers an indication of how such effects can spread through the economy. Freight charges increased, while companies reported higher distribution costs. Some businesses absorbed the additional costs, but others passed them on to consumers or reduced product quantities.

The latest increase is nevertheless smaller than the historic adjustment made in August 2022. At that time, diesel and kerosene prices rose by 42.5 percent, while petrol and octane prices increased by more than 50 percent.

The current adjustment represents an attempt to balance two competing pressures: protecting BPC from unsustainable losses while limiting the immediate burden on consumers. With international fuel prices remaining volatile and Bangladesh continuing to rely heavily on imports, the country’s fuel market will remain closely tied to developments in global energy markets.

Source: The Daily Star