The Bangladesh Power Development Board (PDB) revealed a surplus payment of Tk 644 crore to the Bangladesh Petroleum Corporation (BPC) for furnace oil supplied to power plants over the past 18 months. In a recent public hearing, PDB officials disclosed that BPC consistently charged Tk 86 per litre for furnace oil, even though the procurement costs varied between Tk 57 and Tk 83 per litre in different months.
PDB emphasized that a more equitable pricing mechanism should be adopted, considering a weighted average of domestic and imported costs rather than a fixed or arbitrary rate. They highlighted that 35 percent of BPC’s furnace oil supply is sourced from the state-owned Eastern Refinery, with the remaining 65 percent being imported.
During the hearing before the Bangladesh Energy Regulatory Commission (BERC), Md Jahangir Alam Mollah, a PDB director, pointed out that the cost of furnace oil at Eastern Refinery should align with the global benchmark price, known as Free on Board (FoB). He highlighted discrepancies where BPC sold furnace oil at Tk 86 per litre, while private companies imported the fuel at Tk 57 per litre in December last year.
The public hearing on furnace oil pricing, convened by BERC for the first time, addressed the concerns raised by PDB, the main consumer of BPC’s furnace oil utilized in government-operated oil-fired power plants. Currently, the country’s furnace oil-based power generation capacity stands at 5,634 megawatts, comprising about 20 percent of the total capacity, with BPC annually selling approximately 8-9 lakh tonnes of furnace oil.
PDB proposed setting the furnace oil price at Tk 50.83 per litre, reflecting a weighted average of BPC’s local production and import costs. In contrast, BPC suggested a price reduction to Tk 81 per litre based on Platts rates, while BERC’s technical evaluation committee recommended a price of Tk 74.04 per litre.
Addressing the escalating power generation costs due to high fuel prices, PDB Chairman Md Rezaul Karim emphasized the need for adjustments to safeguard consumers. He underscored the importance of fair practices, stating that while profitability is essential, it should not come at the expense of other entities.
BPC General Manager (Accounts) ATM Selim highlighted that the global price mentioned by PDB does not encompass additional costs like duties and charges. Additionally, BPC and three distributor companies proposed higher distribution margins, citing losses in furnace oil sales despite overall profitability.
During the proceedings, the companies admitted to distributing substantial profit bonuses and dividends to shareholders, predominantly from non-operating segments rather than core business operations. BERC Chairman Abdul Jalil assured a thorough review of all data and evidence to ensure a fair decision, with written submissions accepted until February 3 before announcing the final verdict.