Bangladesh Diesel, Petrol, Octane, Kerosene Prices Hiked by Tk 20 a Litre | Fuel prices up Tk 20 across the board

The government has raised the prices of all four major petroleum products by Tk 20 a litre, passing on to consumers a large share of the high import cost that has been mounting since the US war on Iran.

The new prices, effective from 12:00am today, take diesel to Tk 135 a litre from Tk 115, octane to Tk 165 from Tk 145, petrol to Tk 160 from Tk 140, and kerosene to Tk 155 from Tk 135.

The hike is the biggest since the record adjustment of August 2022, when the government raised prices amid the global energy crisis triggered by Russia’s invasion of Ukraine.

This is the third fuel price hike since the BNP-led government took office in February and takes all four petroleum products to their highest-ever retail prices.

Diesel, the fuel most deeply embedded in Bangladesh’s economy, is now 35 percent more expensive than it was immediately before the US-Israel war on Iran.

It cost Tk 100 a litre in February, compared with Tk 135 now. Diesel price was increased by Tk 15 in April.

Octane climbed from Tk 120 to Tk 165, petrol from Tk 116 to Tk 160, and kerosene from Tk 112 to Tk 155 over the same period.

The economic implications are likely to extend far beyond filling stations because diesel alone accounts for nearly two-thirds of all petroleum products consumed in the country.

Bangladesh Petroleum Corporation data show that around 4.35 million tonnes of diesel are consumed every year, accounting for roughly 64 percent of the country’s total petroleum consumption.

Transport is by far the largest consumer of diesel, accounting for around 60 percent, followed by agriculture, mainly irrigation, around 15 percent, power generation around 10 percent, and industries about 5 percent.

Higher diesel prices therefore feed into the cost of moving passengers and goods, producing crops and operating factories, creating the potential for a second-round impact on food and other consumer prices.

The effects were visible after the government’s previous fuel hike in April, when the prices were increased by Tk 15 to Tk 20.

Freight charges from Chattogram port increased, and consumer goods companies reported rising distribution costs. Some manufacturers responded by cutting margins or resorting to shrinkflation or hiking prices.

Another adjustment followed on June 1, when octane, petrol and kerosene were raised by Tk 5 each, although diesel was kept unchanged.

The mounting import costs eventually made Bangladesh Petroleum Corporation (BPC) post a loss of Tk 22,875 crore between March and August.

BPC has sought reimbursement of the amount through government subsidies.

The Energy Division, in a statement yesterday, said international petroleum prices and freight charges had risen substantially since March because of the continuing war and that the government had refrained from passing the full increase on to domestic consumers.

According to the ministry, BPC was losing around Tk 89 on every litre of diesel sold before today’s price hike. This translates into a daily loss of around Tk 109 crore, or close to Tk 40,000 crore a year.

The government estimates that raising fuel prices by Tk 20 a litre could cut BPC’s annual losses by around Tk 10,000 crore.

Even after yesterday’s adjustment, however, consumers are still not being asked to bear what BPC calculates as the full import-linked cost of diesel.

For September, the BPC had proposed a retail diesel price of Tk 187 a litre. It also proposed Tk 154 for octane, Tk 150 for petrol and Tk 146 for kerosene.

The corporation warned the Energy Division earlier this month that its available funds could become inadequate for opening letters of credit for fuel imports in October unless it received additional financing.

As of September 6, BPC had around Tk 12,368 crore in usable working capital, enough to meet import payments for September but insufficient to sustain purchases afterwards without fresh funds.

It estimated that another Tk 15,000 crore to Tk 20,000 crore would be needed to maintain working capital equivalent to around two months of fuel imports.

BPC has already diverted Tk 19,500 crore kept for the Eastern Refinery expansion and other development projects to finance petroleum imports.

Bangladesh is particularly exposed to international fuel-market volatility, as around 92 percent of its petroleum-fuel demand is met through imports. Brent crude has recently crossed the $100-a-barrel mark, up from around $72 before the war began on February 28.

The government also cited the risk of cross-border smuggling, saying domestic diesel prices had remained lower than in most neighbouring countries. It said diesel costs Tk 134.76 a litre in Kolkata, Tk 164.83 in Myanmar, Tk 161.24 in Nepal, Tk 179.42 in Sri Lanka, and Tk 185.48 in Pakistan.

In the statement, the ministry explained that keeping domestic prices substantially lower while using foreign currency to import the fuel was becoming increasingly difficult. It also pointed to large subsidies for LNG needed to maintain gas and electricity supplies.

Yesterday’s increase nevertheless remains far below the country’s biggest-ever one-off fuel price hike. In August 2022, amid the global energy crisis following Russia’s invasion of Ukraine, diesel and kerosene prices jumped 42.5 percent, while petrol and octane rose by more than 50 percent.