Staff Correspondent

The interim government has formed a 14-member committee to review the possibility of a unified policy for both public and private entrepreneurs on the import of crude oil.

Additional Secretary (Operations) of the Energy Division Khalid Ahmed has been made convener of the committee while deputy secretary (Operation-1) will work as the member secretary.

The committee also includes the director (Operation and Planning) at Bangladesh Petroleum Corporation (BPC), Energy Division’s joint secretary (Operation-1), a representative from the VAT and Customs wings each of the National Board of Revenue (NBR), a representative of the Consumer Association of Bangladesh (CAB), an energy expert nominated by the interim government, BPC general manager (Accounts) and representatives from five refineries. The committee formed recently will analyse the current challenges of importing unfinished fuel oil and submit a report on the activities of BPC and private refineries in this regard.

The committee can suggest ‘best practices’ for the Energy Division considering the growth of the sector.

The Ministry of Power, Energy and Mineral Resources will make a further decision based on the suggestions of the committee to address the dual policy, which leaves the country’s private crude oil importers to face significant financial challenges.

With the formation of the committee, the entrepreneurs of private refineries hope for an immediate solution to eliminate discrimination in the fuel oil import.

The private importers claim higher import costs due to the dual policy in the sector while huge investment in the energy sector faces uncertainty.

The private refineries count ‘almost double’ duty on tariff value compared to the state-owned BPC for importing crude oil.

There are five fuel oil refineries in the private sector -- Super Petrochemical, Bashundhara Oil and Gas Company, Partex Petro, Petromax Refinery and Aqua Refinery.

Regarding the initiative, Partex Group Chief Executive Officer Subir Kumar Ghose said the importers of crude oil are suffering from two aspects due to the dual policy.

“While importing crude oil, we have to pay more duty due to the assessment of duty on invoice value. On the other hand, when we refine the crude oil and sell it to the BPC, they pay us by pricing it at the tariff value. We’re greatly affected by this. Factories can’t go into production at full capacity due to the dual policy,” he said.

Subir Ghose mentioned that the company can now refine around 12,000 barrels of fuel oil per day although its production capacity is much higher.

“The production can’t be increased due to the increased duty. The more the private refineries refine oil, the more profit the government makes. Because the government is able to buy refined fuel oil from private refineries at a price 1% lower than the world market,” he added.

The private refineries will be able to produce the entire octane requirement in the country and there’ll be no need to import octane if the import discrimination is eliminated, saving a huge amount of foreign exchange, Subir Ghose said.

Economists and energy experts have also called for eliminating the dual policy for the same product in a country and implementing a single policy for importing crude oil.

Either the pricing formula should be determined by evaluating the duty on the tariff value or the invoice value, according to the analysts.

The BPC levies tariff value during clearance from the Chattogram Customs House after the import. On the other hand, when private companies import goods in the same HS code, they are taxed at the invoice value.

The customs house allows private companies to redeem goods subject to full payment. The BPC determines the value of the goods without accurately determining the customs duty levied on the goods with respect to the invoice value of the goods.

The NBR subsequently notes the demand for payment of excess to BPC while the state-owned company does not include it in its pricing formula.

Economists say to keep the country’s economy stable, the government must come out of the dual policy of pricing. Pricing should be done on the same principle for both public and private sectors and only then the financial crisis will be over and it will be possible to prevent fuel oil smuggling.

Former teacher of Bangladesh University of Engineering Technology (BUET) Prof Ijaz Hossain said there should not be a dual policy for the same product in one country. “It needs to be looked at from what thoughts and ideas the ousted Awami League government adopted such a policy,” he said.

The last government started automatic price determination of fuel oil in line with the world market from March this year.

The current price of diesel and kerosene is Tk105.5 per litre, octane Tk125 and petrol at Tk121 per litre. The annual demand for fuel oil is around 72 lakh tonnes, of which 50 lakh tonnes is diesel.