Fuel prices rise amid mounting subsidy burden

Collected Photo

The government has raised the prices of diesel, kerosene, octane and petrol by Tk20 per litre to ease the mounting subsidy burden amid soaring international fuel prices.

The Energy and Mineral Resources Division announced the new prices in a notification on Sunday night, with the revised rates taking effect from midnight.

Under the new pricing, diesel will cost Tk135 per litre, up from Tk115; kerosene Tk155, up from Tk135; octane Tk165, up from Tk145; and petrol Tk160, up from Tk140.

The last major price adjustment was made in April, when diesel prices were raised by Tk15 per litre, while the prices of octane, petrol and kerosene were increased by Tk20, Tk19 and Tk18, respectively.

Retail fuel prices have been reviewed under the automatic pricing mechanism since 2024. The adjustments take into account international oil prices, import costs, taxes and duties, exchange rates and other related expenses.

The Energy Division said prices of all types of fuel oil and freight charges in the international market have increased significantly since March due to the ongoing war in the Middle East, and the upward trend is continuing.

According to the Energy Division, lower domestic fuel prices than international rates had increased the risk of smuggling to neighbouring countries. The price hike was therefore aimed at curbing smuggling, saving foreign currency and reducing BPC losses.

However, despite fuel prices in the international market rising by more than double, the government did not increase domestic prices in the public interest. As a result, the Bangladesh Petroleum Corporation (BPC) incurred losses of around Tk22,875.66 crore from March to August.

In August, the BPC sought more than Tk18,699 crore in government subsidies after the conflict in the Middle East sent international oil prices soaring.

Despite the losses, the BPC has continued to import fuel using its own funds for the past five months and is currently incurring a daily loss of around Tk83 crore, according to a written response by Energy Minister Iqbal Hassan Mahmood tabled in Parliament recently.

According to BBC, petrol and diesel prices have reached their highest levels since 2022 as the ongoing conflict in the Middle East disrupts oil production and transportation. Wholesale oil prices have risen above $100 a barrel, putting further pressure on consumers worldwide.

Neighbouring countries, including India and Pakistan, have also raised fuel prices in response to higher international market rates.