The unreal reality of oil price revision

| Updated: October 24, 2017 18:27:31

The unreal reality of oil price revision
While rise in oil price is symptomatic of rise in prices of commodities and services making human living costlier, the recent fall -- unprecedented in ages - is more than a puzzle, a brainteaser in that it stays away from influencing the economic life of this country. Simply put, the oil price slump has fetched no gains for Bangladesh economy so far. Tucked under the wisdom of the government policies, albeit egotism, the benefits from the exceptional price fall are far from reaching the economy that economists all over the world consider a God-sent, one-off opportunity to cash in for growth and development.
Around a month back, it looked like the government was contemplating on reducing the local market price of various grades of gasoline, in the wake of strong criticisms from experts terming government inaction to respond to the global oil price fall a spoiled opportunity. But as evident from the statements of responsible quarters, such a move is not going to happen in the near future. No doubt, the government wanted its state-run agency Petroleum Corporation (BPC) to make good profit and overcome the losses it suffered over the years amounting to several billions of takas. 
Well, the BPC has gained what it was up to, and no one should feel jealous about the state agency's windfall fortune. But what has emerged lately from the statements made by the BPC and the finance ministry is utterly confusing.
The money that the BPC received from the ministry of finance amounting to around Tk 263 billion over the period since 2000 was in the form of subsidy, not loan. But now the ministry won't let it be treated as subsidy, as the BPC is no longer impoverished, and is getting richer with every consignment of oil imported. In the last fiscal, the BPC imported around 5.80 million tonnes of petroleum products -- crude and refined combined, which is 9.43 per cent higher than the previous year's 5.30 million tonnes.  
Presently, according to reports, the BPC is making profit of Tk 27 from sale of per litre of diesel, Tk 26 from per litre of furnace oil and Tk 37 and Tk 39 respectably from petrol and octane. Now, if the BPC fails to reason out its case with the finance ministry and is compelled to pay back the subsidy money in the form of loan with interest (5 per cent, as demanded by the ministry), it will become totally uncertain how long will it take for the BPC to accumulate enough to pay back Tk 263 billion. This apart, the vital question of oil price adjustment in the local market may go haywire amid the narrow game plan of the authorities. It has been learnt that the ministry of power recently sent a report to the ministry of finance detailing the BPC's financial condition and overall impact of the dipping oil prices in international market to help the government decide on a downward price revision. But if the finance ministry is bent on realising the money it dished out as subsidy - now being claimed as loan, and in the process stops the multifaceted gains of oil price fall to reach the people at large, this country is going to set an example of thoughtless apathy to public welfare. 
As the issue of 'loan repayment' appears to have halted any move in the direction of price adjustment, observers find it difficult to fathom how public interest gets negated by such official wrangling. By not responding to the falling oil prices, the government has also moved away from the commitment it made to the International Monetary Fund (IMF) to adjust domestic prices of oil and petroleum in keeping with the drastic fall in international oil prices. Such commitment apart, it is in the interest of the country that the government should have thought out how best to benefit from the falling prices. 
The question, one feels, the government has to ask itself is: does it consider BPC's profit more important than the macro-level gains that otherwise was likely from various segments of the economy in the prevailing situation? Understandably, in the absence of any downward revision, the manufacturing sector of the country -- largely dependent on oil-fired power generation -- is counting heavily on the cost of production, thus being severely affected in its competitive edge in the global market. Improved performance of the industrial sector in the event of lowered oil prices is likely to benefit the government on account of higher tax revenue. Balancing international prices with domestic retails will have a beneficial impact on inflationary pressure as well. It will substantially cut production cost in the agro sector by way of easing irrigation at much lesser fuel prices. One must not take the government too naïve not to understand these. But, unfortunately, is there any other way of defining its role?

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