The Bangladesh Power Development Board (PDB) revealed that it overpaid the Bangladesh Petroleum Corporation (BPC) by Tk 644 crore for furnace oil supplied to power plants over the last 18 months. During a recent public hearing, PDB officials highlighted that BPC consistently charged Tk 86 per litre for furnace oil, despite procurement costs fluctuating between Tk 57 and Tk 83 per litre monthly.
PDB emphasized that a pricing mechanism based on a weighted average of domestic and imported costs should be implemented instead of a fixed rate. According to Md Jahangir Alam Mollah, a PDB director, the cost of furnace oil at the state-owned Eastern Refinery should not exceed the global benchmark price known as Free on Board (FoB), which BPC currently surpasses.
The public hearing conducted by the Bangladesh Energy Regulatory Commission (BERC) focused on furnace oil pricing for the first time. PDB, as the major consumer of BPC’s furnace oil used in government oil-fired power plants, voiced concerns regarding the pricing structure.
The country’s furnace oil-based power generation capacity stands at 5,634 megawatts, constituting about 20 percent of the total capacity. BPC annually sells around 8-9 lakh tonnes of furnace oil, with a significant portion utilized by government-owned power plants. Despite receiving substantial government subsidies, PDB incurred a hefty loss due to selling electricity below production costs and acquiring furnace oil at inflated rates from a government entity.
Proposals were put forth by PDB to set the furnace oil price at Tk 50.83 per litre based on a comprehensive cost analysis, while BPC suggested a reduction to Tk 81 per litre. BERC’s technical evaluation committee recommended a price of Tk 74.04 per litre.
PDB Chairman Md Rezaul Karim stressed the need for adjustments in power generation costs to shield consumers from escalating fuel expenses. He underlined the importance of ensuring fairness among companies involved in the fuel supply chain.
BPC’s General Manager (Accounts) ATM Selim noted that the global price referenced by PDB lacked consideration for additional costs like duties and charges. Furthermore, BPC and distributor companies proposed higher distribution margins, citing operational losses despite overall profitability.
During discussions, it was revealed that companies distributed significant profit bonuses and dividends to shareholders, emphasizing that the bulk of earnings came from non-operating segments rather than core business activities.
BERC Chairman Abdul Jalil assured a thorough review of all data and evidence to reach a fair decision. Stakeholders have until February 3 to submit written statements before BERC announces its final determination.
