Bangladesh: Govt plans fresh fuel price hike

Dhaka, July 6, 2013 (New Age): The government is planning to raise fuel oil prices to increase its revenue by at least Tk 1,000 crore a year although it is already counting profit from the sector, officials said. It is yet to finalise the level of hike in the fuel oil prices and when it would come into effect, they said. In a bid to achieve the goal, the government increased the tariff value of crude petroleum oil to $40 per barrel, up from $32 per barrel and that of other refined petroleum products to $0.40 cent per litre, up from $0.31 per litre, the officials said. The previous rate of tariff value enabled the government to earn about Tk2,400 crore in 2013-14 financial year by realising taxes from the Bangladesh Petroleum Corporation even after paying the state-run agency Tk 2,400 crore in subsidy for the year, the officials said. The BPC, however, incurred a loss of about Tk 3,000 crore in the last fiscal, a petroleum corporation official said. He said that the tariff value hike would cause the BPC to count an additional Tk 1,000 crore in loss a year, in the form of tax it would pay to the government. The government would shift the entire burden on the consumers by increasing the fuel oil prices, the official said. The NBR, on behalf of the government, realises tax based on the tariff value of a product which implies in a way that the more the tariff value the more the tax. The National Board of Revenue issued a circular in this regard immediately after finance minister AMA Muhith on June 5 proposed in his budget speech for increasing the tariff value of the petroleum products. The BPC informed the energy division about the possible impact of the increased tariff value of crude and refined oils on its financial status, BPC chairman Md Eunusur Rahman told New Age. When asked, he said that the BPC would count up to Tk 2 in loss per litre for the increased tariff value of petroleum products. ‘We would seek more money to make up for the additional loss,’ he said. In the 2013-14 financial year, the BPC paid about Tk 7.14 in taxes on an average for each litre of fuel oil to the government’s exchequer, a petroleum corporation official said. Now the government would increase the price of fuel oils at the consumer’s end so it would not have to pay it back to the BPC in subsidy, he said. BPC estimated that it would incur a loss of about Tk 3,000 crore in the 2013-14 fiscal year although the government gave it Tk 2,400 crore to make up for the loss, the official said. The government, showing the BPC as a losing concern, already raised the price of diesel and kerosene by Tk 24 per litre, from Tk 44 to Tk 68, and that of petrol and octane by Tk 22 per litre in five phases between May 2011 and January 2013. It also increased the price of furnace oil by Tk 36 per litre, from Tk 24 to Tk 60 per litre, in 2011. The NBR, in a desperate move to raise the revenue to make up for a potential budget deficit in 2014-15 fiscal year, issued a circular asking the BPC to pay taxes for imported crude considering the new tariff value. Finance minister Abul Maal Abdul Muhith, in his budget speech in parliament on June 5, 2014, argued that the international price of petroleum products had increased significantly in the last 10 years but their tariff values had not been revised during the period. On June 29, 2014, parliament approved the budget of Tk 2,50,506 crore for the new financial year, with a deficit of Tk 67,552 crore.