BPC eyeing Tk10,000cr profit

The Bangladesh Petroleum Corporation (BPC) could earn Tk 19,600 crore in a year following the latest fuel price hike, which the government says has come in the backdrop of the rising rates in the international market.

The state-run organization is likely to make a profit of over Tk 10,000 crore after paying an estimated Tk 9,251 crore to the National Board of Revenue (NBR) as VAT and tax in this fiscal year.

Based on its import and distribution data, experts have said, BPC will gain several thousand crore takas if the fuel price is predicted to decrease further in the global market.

Although State Minister for Power, Energy and Mineral Resources Nasrul Hamid has claimed BPC is losing Tk 8 per litre of diesel despite a significant price hike, the data has presented a different picture.

The Energy Division also claims that BPC has counted a Tk 8,000 crore loss by selling fuel oils in the last five months since the Russia-Ukraine war broke out in February.

On Friday night, the government announced a record hike in diesel, petrol, octane and kerosene prices in the country’s history. There have been widespread concerned reactions at all levels to this hike as the country recorded 7.48 per cent inflation in July.

Diesel price has been increased by Tk 34 to Tk 114 per litre — a 42.5 per cent hike from the previous Tk 80.

Octane price went up by Tk 46 to Tk 135 and petrol by Tk 44 to Tk 130 per litre. Kerosene will also cost Tk 114 per litre.

Energy experts have said that there was no need to increase the diesel price because the country currently buys the liquid fuel from the global market at the same rate it was being sold here before the latest hike.

Tk 11,600cr profit from diesel?

According to BPC, Bangladesh imports 4 million tonnes of diesel oil every year. Companies from different countries including China, Malaysia and Indonesia supply this by floating tenders.

BPC’s accounts department says diesel price is currently fluctuating between $130 and $135 per barrel in the Asian market, along with the premium or shipping bill, insurance and other costs of $11.

As a result, BPC says, the cost of per barrel diesel ends up at $141 to $146 at the landing stage in Chattogram Port.

One barrel contains 159 litres of oil. It has been seen that per litre diesel costs Tk 82-85 at the import level. But the government has increased diesel prices from Tk 80 to Tk 114 per litre, which means BPC likely to earn Tk 29 more per litre.

By this calculation, BPC will make a Tk 11,600 crore profit after importing 4 million tonnes, or 400 million litres, of diesel annually.

Tk8,000cr from octane, petrol, kerosene?

According to BPC, Bangladesh is self-sufficient in petrol and kerosene. But 40 per cent of the total demand for octane is domestically produced while 60 per cent is imported.

Petrol and octane, as well as kerosene, come from condensates produced at the country’s gas fields.

BPC buys the condensates from the gas fields owned by Petrobangla and then sends them to the Eastern Refinery Limited (ERL) in Chattogram for refining.

Mohammad Lokman, managing director of BPC-owned ERL, recently told The Business Post that it costs ERL Tk 195 to refine one barrel of condensate, which means it costs a little over Tk 1 to get one litre of octane, petrol or kerosene.

A BPC official, requesting anonymity, said the cost of each litre of petrol, octane and kerosene at the purchase, transport, production and marketing stage is generally Tk 10-15 but the amount fluctuates every month.

Accordingly, the petrol and kerosene prices should not be more than Tk 20 per litre.

On the other hand, if the 60 per cent octane import cost is added with 40 per cent domestic production cost, the average cost ends up at Tk 45-50 per litre.

However, the government has been keeping the octane, petrol and kerosene prices several times higher for a long time.

In FY2020-21, BPC had sold 3,03,917 tonnes of octane. Per litre octane will now cost Tk 135 in line with the new rates. If Tk 50 is excluded as production and marketing costs, BPC stands to make a profit of Tk 85 per litre and Tk 2,400 crore in total.

Also, in FY21, BPC sold 3,78,846 tonnes of petrol and 1,17,083 tonnes of kerosene. Now, per litre petrol costs Tk 130 and per litre kerosene costs Tk 114.

Altogether, BPC stands to make a profit of at least Tk 5,500 crore by the end of the year by earning Tk 110 per litre of petrol and Tk 94 per litre of kerosene if Tk 20 is excluded as production and marketing costs.

The loss-profit conundrum

However, BPC General Manager (Finance) Moni Lal Das told The Business Post that BPC will incur a loss of $1-2 per barrel of diesel even after the price hike.

State Minister Nasrul Hamid also made a similar claim while talking to reporters on Saturday.

But energy expert Professor Dr Mohammad Tamim, also the dean of the Department of Petroleum and Mineral Resources Engineering at BUET, disagrees.

He said that the government has hiked the tariffs while considering $170 per barrel as the standard rate while the actual price is $130 in the global market. “This is clearly illogical. But by doing this, the government will earn thousands of crore taka in a year.”

In the next two months, the fuel oil prices in the international market have been predicted to drop further. But if the new local prices continue, BPC stands to earn several thousands of crore taka more in a year, he said.

“This means we are will see BPC turn into a profitable organisation,” added Dr Tamim.

From FY2014-15 till FY2020-21, according to BPC’s data, it has made a profit of around Tk 47,000 crore by selling fuel oils.

BPC has paid Tk 8,000 crore as dividends to the exchequer on different occasions during this period, which means it still should have Tk 39,000 crore in its accounts.

But State Minister Nasrul has said that this money has been spent on various development works.

In an emergency, experts said, the fuel prices could have been kept under control if this money was in BPC’s accounts or even by reducing the VAT and taxes BPC pays.

In the current 2022-23 fiscal year, BPC is also set to pay an estimated Tk 9,200 crore as VAT and taxes to the NBR.