Welcome to Business Outlook
Related Articles
The government has planned to increase import of fuel oil by about 15 lakh tonnes in 2023 mainly to feed fuel oil-based power plants to tackle chronic power outages already hitting life and livelihood hard.
According to Bangladesh Petroleum Corporation officials, they are planning to import 77.2 lakh tonnes of fuel oil in the next calendar year.
The amount about 15 lakh tonnes more from BPC’ current year’s projected fuel oil import 62.3 lakh tonnes, said the officials.
BPC officials said they had imported 27.6 Lakh tonnes of fuel oils in six months between January and June in 2022.
The import of the rest of 34 lakh tonnes is in the pipeline and likely to be completed by December, said the officials.
In 2021, the BPC imported 44 lakh tonnes of fuel oils.
They said that the Power Development Board officials wanted the BPC to supply around 1.3 lakh tonnes of diesel and 97,000 tonnes of furnace oil a month since July.
Economists view that the government has no option but to increase fuel import for generating electricity as fund shortage is a bar to importing liquefied natural gas from the international spot market.
Besides, the falling production of natural gas from domestic sources has been seen as a major barrier to generating power at an optimum level to contain the severe power shortage since July.
M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh, however, said that fund shortage and volatility in fuel oil prices might affect the government plans.
He noted that the government had already sought $4.5 billion loan from the International Monetary Fund to overcome the foreign currency crunch.
According to the BPC officials, a proposal from the state-owned lone fuel oil importer for importing 38.6 lakh tonnes of fuel oil under the government-to-government deal had been submitted to the cabinet committee on government purchases.
Finance minister AHM Mustafa Kamal is likely to preside over the meeting virtually today (Wednesday).
According to a provision since 2016, the government buys 50 per cent of its overall fuel oil under the government-to-government deal while the rest half through international tenders.
The government-to-government deal is generally inked with the oil-rich countries like Saudi Arabia, the United Arab Emirates and Kuwait.
According to the Power Development Board’s update on power sector in September, 52 per cent of the country’s installed power generation capacity is based on gas, 27 per cent on furnace oil and 6 per cent on diesel.
It has been reported that electricity generation remained low, with 70 per cent of the country’s power plants staying either fully or partially out of operation due to shortage of primary fuel.
Despite having an installed capacity of over 25,700MW power generation, the country has struggled to use even half of it.
Power outages have turned alarming from the current month affecting industrial production and manufacturing businesses.
According to the Bangladesh Bank, the country spent $8.9 billion on import of petroleum products in financial year 2021-22, about 67 .71 per cent more from $5.3 billion worth import in FY 2020-21.
Prices of fuel oil are hovering about $90 per barrel in the international market, compared to $70 per barrel one year ago.
Most of the international financial entities like the IMF and the World Bank predicted that volatility in prices of commodities would persist throughout the next year.
Former World Bank Dhaka office chief economist Zahid Hussain noted that next year would be more challenging for the government especially to tackle the energy issue.
The import of extra fuel oil, mostly diesel and furnace oil for power generation purposes, will put further pressure on the country’s foreign exchange reserves, he said.
The county’s forex fell to $36.3 billion in the current month from $48 billion in August 2021 because of higher prices of imported commodities including fuel oil.
(NA)
