Govt to monitor global fuel prices for 3 months before price revision

From now and on, the fuel price revisions will follow the three-month global market assessment just to manage extra subsidy pressure due to surging global fuel costs.

As per Finance Ministry’s directive, the Power Division will monitor the global market and send a copy to the Finance Ministry to discuss the price revision issue and its impact on domestic market, sources related with the Finance Ministry told the Daily Observer. 

The finance ministry has instructed the Power, Energy and Mineral Resources Division to prepare a price adjustment proposal following the three-month observation period. 

According to the Finance Ministry, the rising global prices are sharply increasing Bangladesh's energy subsidies along with the dues for electricity purchasing from the IPPS and cross border trade.

To facilitate the process, the ministry formed a six-member committee headed by Additional Secretary (Budget and Law) Md Hasanul Matin. Tasked with rationalising and forecasting energy subsidies, the panel will review global price trends, assess outstanding payments owed to independent power producers (IPPs), and project liabilities from newly commissioned power plants.

Finance officials said the government has not subsidised fuel oil for nearly a decade and made no allocation for it in the current fiscal year.

However, despite more than Tk40,000 crore in cumulative profits, the BPC incurred Tk7,610 crore in losses in April and May as global prices surged following the Iran war.

The Finance Ministry said, although Tk6,000 crore was allocated for LNG subsidies in the current fiscal year's budget, the government had to provide around Tk7,000 crore in subsidies to the LNG sector, including outstanding payments for June and subsidies incurred up to 15 August.

In the previous fiscal year, against an initial allocation of Tk6,000 crore, the government ultimately paid around Tk15,000 crore in LNG subsidies.

The previous fiscal year's initial budget allocated Tk37,000 crore for electricity subsidies, which was raised to Tk62,000 crore in the revised budget.

Besides, the government still owes independent power producers around Tk14,000 crore, despite paying Tk10,000 crore in subsidies over the past two months.

Before the Iran war, the government paid Tk2,500-3,000 crore in electricity subsidies each month. The subsidy burden has increased since the war.

According to Petrobangla, Bangladesh plans to import 115 LNG cargoes in FY27. Disruptions to long-term LNG supplies due to the Iran war have forced the country to procure more from the spot market at higher prices, creating a need for significant subsidies.

To reduce the subsidy burden, finance officials recommended effectively following the least-cost method in power generation and procurement in line with merit-order dispatch.

They also recommended reassessing capacity and energy prices under power purchase agreements, recalibrating power plants' availability factors to align them with plant factors, and ensuring greater transparency and accountability in determining dependable capacity.