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Holes in price hike theory

STAR REPORT
Facts belie the rationale for fuel price hike.
The government said the fuel price hike was necessary, as the state-owned Bangladesh Petroleum Corporation (BPC) incurs huge losses because of 'low' fuel price.
But the fact is the BPC pays over Tk 3,500 crore to the government exchequer as duty and VAT annually.
The so-called 'loss-making' BPC is actually the largest 'cash cow' of the government. As a result, the government is unwilling to let the private sector import and sell fuel based on market dynamics.
Energy experts say the price hike was not justified as the government was not actually incurring any loss. Rather, the BPC was a victim of poor management and wrong policy, they noted.
They also rejected another age-FROM PAGE 1
old argument for price hike -- that petroleum products are smuggled to India because of 'low' fuel price.
"There is no proof of such smuggling. Surely, petroleum products have to be smuggled in huge container lorries. There are no instances of any such lorries seized while smuggling fuel," said a Petroleum sector expert.
On the other hand, the argument that the border with India is porous and impossible to guard is also invalid. Lorries have to move on roads and such roads having links with India are a few. There is no way of smuggling huge quantity of fuel through any other routes. The existing roads are easy to check.
Under the present policy, the government is the sole importer of petroleum products. It also fixes the petroleum price and the BPC has to pay huge taxes.
"Various duty and taxes make fuel price over two times higher than the purchase rate. But the BPC sells the same at a price lower than the taxed price," said a BPC source.
Because of this policy the BPC incurs losses.
In addition, as the government takes away all the cash from the BPC, the corporation has been running in severe cash crunch for the last three years.
Our Chittagong office quoting BPC sources said the BPC's accumulated loss in the last three years since 2001 amounted to Tk 3,100 crore.
On an average 35 lakh metric
tons of fuel including crude and refined are imported every year. Last year, the BPC imported 33 lakh metric tons of fuel worth around Tk 3,500 crore. This year, it will import 35 lakh metric tons costing around Tk 4,000 crore.
Sources said the government would earn an additional Tk 890 crore this year because of the price hike.