The fuel oil price slide on the international market has eased the government’s budgetary pressure as cost of its petroleum import would be reduced by up to 30 per cent, experts said.
They, however, said that the benefit of the downtrend in the fuel price on the international market, which began in June this year, depended on the government’s decision on reduction in its price on the local market.
Economist and former interim government adviser Mirza Azizul Islam told New Age, ‘It is a good news for the country.’
He, however, said that people would not get the benefit unless the government reduces the price on the local market as the cost of production would remain the same.
Policy Research Institute executive director Ahsan H Mansur said that the government could save up to 30 per cent of the payment for fuel import.
He, however, said that the country’s labour market in the Middle East would face trouble as an effect of the fuel price crunch on the international market.
The fuel oil price slumped below $70 a barrel for the second day in a row on Friday after the OPEC oil producing cartel decided to maintain crude output despite a huge oversupply in the world markets.
Market analysts predicted that the fuel price would keep falling to as low as $60 a barrel reducing the price by nearly 50 per cent in less than six months.
Oil price has fallen by more than a third since June as increasing production of shale oil in North America has overwhelmed demand at a time of sluggish global economic growth.
The government, however, has no plan to reduce the price on the local market although it had raised the price of diesel and kerosene by Tk 24 a litre, from Tk 44 to Tk 68, and that of petrol and octane by Tk 22 in five phases between May 2011 and January 2013.
It also increased the price of furnace oil by Tk 36 a litre, from Tk 24 to Tk 60 a litre, in 2011.
In a bid to raise further revenue earnings, the government since June 2014 increased the tariff value of crude oil to $40 a barrel up from $32 a barrel and that of other refined petroleum products to $0.40 a litre up from $0.31 a litre.
Zaid Bakht, an economist and Agrani Bank chairman, said that the level of government borrowing would decrease with a significant rise in foreign exchange reserve due to the fall in fuel oil price on the international market.
The government, as the lone importer and marketing authority, spent some $4.5 billion to import 5.4 million tonnes of crude and refined oils in the 2013-2014 financial year.
The amount of payment was about 20 per cent of the country’s foreign exchange reserve which was $22 billion at the end of the past financial year.
Zaid said, ‘Now the import trend is in a good position with the rise in capital machinery import.’
The downtrend in fuel oil price on the international market created a better equilibrium between import and balance of payment in the country’s economy, he said.
‘It is a good time to allow the private sector to import and market the petroleum products in the country,’ Ahsan said.
He suggested waiver of taxes on diesel and kerosene keeping octane like high-end product under taxation.
It could be the first step of the government in ‘liberalising’ the fuel market in the country.
-With New Age input
