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Retail prices of diesel and kerosene see a small cut by Tk 1.25 and petrol and octane by Tk 6.0 per litre with effect from September 1, in the interim government's first step on energy pricing.
The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) issued a gazette notification Saturday on the revised prices of petroleum products under a prevailing automatic fuel-pricing formula.
As per the notification, signed by information and public relations officer of the MPEMR Mohammad Shafiullah, the prices of diesel and kerosene have been lowered to Tk105.50 per litre from the existing Tk106.75.
The price of petrol has been cut to Tk 121 per litre from the existing Tk 127 and octane reduced to Tk 125 per litre from Tk 131 a litre.
Petroleum prices on the domestic market were unchanged in August, selling at the prices fixed for July, as the previous authoritarian government could not look into it and was busy in facing mass upsurge spearheaded by students' quota-reform movement that ultimately led to its fall, sources said.
The automatic fuel pricing was first introduced on March 7, reducing the prices of diesel, kerosene, octane and petrol.
The fuel-pricing formula aimed at ensuring 'no loss, no profit' status for the state-run Bangladesh petroleum Corporation (BPC).
Bangladesh government is to fix the domestic oil prices every month under the new formula.
The government usually applies Platts' oil-product assessments or benchmarks for fixing rates of refined oils, and for crude oil, it looks at S&P Global Platts's Dated Brent benchmark while buying petroleum products from the international market.
The BPC in late February prepared a guideline on automatic oil pricing under which the prices of all petroleum products will be fixed.
Under the guideline, all types of costs, including international market price, import tax, advance income tax and value- added tax, operational expenses, administrative and maintenance costs, BPC's margin and distributor's margins are to be added up before fixing the prices of petroleum products.
"The prices of octane and petrol are considered as that of luxury fuels, under the guideline, and hence their prices should be kept always higher by at least Tk 10 per litre than diesel," it narrates.
The price differentials between octane and diesel should be at least Tk 10 per litre on the domestic market, the guide spells out.
Bangladesh usually imports around 300,000 tonnes of octane annually to meet domestic demand, while the demand for petrol is met through production from the country's lone crude-oil refinery - Eastern Refinery Ltd (ERL)-- and from condensate fractionation plants.
Since its independence in 1971, Bangladesh had fixed domestic petroleum-product prices by executive orders by the government.
The BPC would attain profit from petroleum trading in most of the years and provide dividend to government after clearing all debts and liabilities, including taxes and VAT.
The finance ministry would provide subsidy when the BPC incurred a loss in petroleum -product trading when the oil prices on the international market were high and volatile.
Sources said Bangladesh introduced the automatic oil -pricing formula for the first time in line with a recommendation from the International Monetary Fund (IMF).
It is among several conditions for a reduction in subsidies as set by the IMF in a package of $4.7-billion loan the past government agreed on.
Bangladesh already received $476.2 million as the first tranche and $689 million as the second tranche of the IMF loan in February and December 2022 respectively.
The entire amount of the IMF credit is set to be paid in seven instalments over three and a half years, until 2026. As such, five more instalments are left in the pipeline.
The IMF approved around US$ 3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $ 1.4 billion under the Resilience and Sustainability Facility in the package.