An automated system for pricing gas, oil, and fuel, in sync with the global market, will go into effect on March 1.
This system will ensure that local market prices are aligned with global market fluctuations, rising or falling accordingly.
This initiative is an attempt to lessen the effects of fluctuating global oil prices and was spurred by conditions imposed on IMF loans. Fairness is the goal of the adjustment mechanism, which takes into account things like exchange rates and import expenses.
While talking to reporters at the Secretariat on Tuesday, Minister of State for Power, Energy, and Mineral Resources, Nasrul Hamid said, the price of fuel oil will also be adjusted in the first week of March.
The government will move to ‘dynamic pricing’, where crude oil prices will be adjusted as they rise or fall in the global market.
During a press briefing at the Secretariat on January 16th he said, fuel oil prices will undergo monthly dynamic adjustments in contrast to neighboring countries that adjust prices daily.
Reports show, Bangladesh has not lowered fuel prices since 2013, with the most recent adjustment occurring on August 30, 2022. Then the government increased the prices of different types of fuel by up to 51.7 percent, later reducing them marginally amid widespread criticism.
Concerns anticipate that the general public will benefit from this new policy as fuel oil prices may drop in line with the world market.
Additionally, the Energy Division plans to introduce dynamic pricing for gas, making it parallel with production and import costs. This initiative aims to fulfill commitments to phase out subsidies by 2026.
The government is optimistic about increasing gas production domestically, and aims to minimize gas imports. Plans include drilling more wells and bringing in additional Floating Storage Regasification Units (FSRUs) by 2027. To address energy security concerns, the government emphasizes timely fuel supply to power plants. However, tensions in the Middle East pose challenges to maintaining oil prices.
The government also plans to commence deep-sea oil and gas exploration and promote clean energy initiatives, aiming to fulfill 40% of total energy demand with clean energy by 2041.
While experts anticipate potential benefits for consumers, concerns linger regarding public transport fare adjustments and transparency issues.
The recent amendment allowing price adjustments without public hearings raises transparency concerns.
Electricity price hikes
Meanwhile, electricity prices in Bangladesh will increase from the first week of March. The increase per unit could range from 34 to 70 paisa for consumers.
The state minister is reluctant to call it a price hike. He said that if the price is higher than the cost, it would be called a price increase. Now there is a shortage, so prices are being adjusted. But it is very little.
Nasrul Hamid said that the price of the US dollar was calculated at 70 to 80 taka while making the coal power plant. Now the price of the dollar has increased by over Tk40. Therefore, the cost of power generation has increased a lot. Prices are adjusted around the world based on fuel consumption.
“Those who consume up to 50 units will see a price hike of 34 paisa per unit. For those consuming more than 50 units, the increase will range from 34 to 70 paisa per unit. The new power tariff will come into effect next month (March),” he told journalists in his ministry conference room.
‘’There are 1.40 crore lifeline customers. They pay the bill at Tk. 4 (per unit); those who are above are charged Tk. 7. But on average, our production cost is Tk. 12 per unit.’’
Additionally, the price of gas used in electricity production has been raised by 75 paisa per unit, he added.
Nasrul said that the government has been giving a major portion as subsidy, adding, “Subsidy has increased more due to dollar exchange rate variation. The government gives Tk. 43,000 crore as subsidy annually.”
“A gazette notification to this effect is set to be published soon,” he added.
According to a report by the non-governmental organization Center for Policy Dialogue (CPD), 41% of capacity was not used in the previous year.
Experts believe that the cost of production would not have increased as much if payments of a sizable sum had not been made to the quick rentals, if low-cost power plants were operated, and if power plants were built through competitive tenders.
In the past, electricity was inexpensive for people.
Moreover, the government’s decision to involve the private sector in crude oil imports raises questions about potential unchecked pricing.
Despite debates, the government views the system as a means to phase out fuel subsidies and boost revenue.
Sources said the government is now raising electricity prices by bypassing the Bangladesh Energy Regulatory Commission (BERC). As a result, the public hearing does not review the issues of how much the cost is or where the cost can be reduced.
As Bangladesh prepares for the change, its efficacy in promoting fairness and consumer benefits remains a topic of contention.
