When the current budget was being drafted last year, global fuel oil prices were on the rise. As a result, the government had to allocate a higher amount for Bangladesh Petroleum Corporation (BPC) to cover fuel imports. However, international prices have since dropped, prompting a revision in the budget. In the revised version, the allocation for fuel imports has been reduced accordingly—saving BPC over BDT 230 billion in oil import costs this fiscal year.

The Ministry of Finance recently approved BPC’s revised budget for the 2024–25 fiscal year (FY). Under this revised plan, the previously approved allocation for fuel imports has been lowered. In the original budget, BPC was allocated BDT 992.49 billion for oil imports. Of that, BDT 826.04 billion was set aside for refined oil and BDT 166.45 billion for crude oil.

But under the revised budget, the total allocation for oil imports has dropped to BDT 759.82 billion. Of this, BDT 617.26 billion is now earmarked for refined oil imports and BDT 142.56 billion for crude oil. This means the revised allocation for fuel imports is BDT 232.67 billion less than the original figure.

Explaining the cut, BPC officials said oil prices were high at the time the original budget was prepared, which required a higher allocation. But with prices falling in the global market, the revised budget has naturally been adjusted downward.

Muhammad Morshed Hossain Azad, General Manager (Finance) of Bangladesh Petroleum Corporation (BPC), told Bonik Barta, “When the premium drops, import costs also come down proportionately. At first, the premium was set at $7.17 per barrel, which was later reduced to $5.16. We brought it down through negotiations. As a result, there will be a significant reduction in fuel import expenses in the current fiscal year.”

According to data from OilPrice.com, the price of Arab Light crude oil was $88.50 per barrel on July 4 last year. As of yesterday (May 21), it had dropped to $66.30 per barrel. Similarly, Murban crude oil was priced at $87.44 per barrel on July 4 last year but fell to $64.88 per barrel as of yesterday. In addition to crude oil, the global prices of refined fuels have also been trending downward.

Currently, only about 8 percent of Bangladesh’s fuel demand is met through domestic sources. The rest is fulfilled through imports. BPC imports crude oil from Saudi Arabian Oil Company (Saudi Aramco) and Abu Dhabi National Oil Company (ADNOC) of the United Arab Emirates (UAE). Apart from these, BPC also imports refined petroleum products through government-to-government (G2G) agreements and international tenders from eight other countries.

Around five years ago, BPC was dealing with a significant amount of accumulated losses. However, following the increase in domestic fuel prices in 2020, the corporation began to turn a profit. By the end of the FY 2023–24, BPC’s retained earnings had reached BDT 318.67 billion. With lower spending on fuel imports, the revised budget for the current fiscal year anticipates that BPC will remain profitable. By the end of this fiscal year, the corporation’s surplus is expected to stand at around BDT 27.67 billion—reversing the initial projection in the main budget, which had estimated a BDT 49.88 billion deficits. In the previous fiscal year, BPC posted a surplus of BDT 54.11 billion.

Data from Bangladesh Bank shows that during the July–March period of the current FY 2024–25, the country’s fuel import expenditure dropped compared to the same period the previous year. In the first nine months of this fiscal year, BPC imported crude oil worth $515.6 million, whereas the figure for the same period last year was $725.2 million. Meanwhile, during July–March of this fiscal year, spending on refined fuels and petroleum products totaled $3.57 billion, slightly down from $3.60 billion in the same period of the previous fiscal year.

An analysis of the first nine months of the current fiscal year shows a mixed trend in the opening and settlement of Letters of Credit (LCs) for oil imports. While LC activity increased for crude oil imports, it declined for refined fuels. Between July and March of FY 2024–25, the value of LCs opened for crude oil rose by 42 percent compared to the same period of the previous fiscal year, reaching $874.9 million. The settlement of these LCs also increased by nearly 32 percent, totaling $802.5 million. In contrast, the value of LCs opened for refined fuel imports dropped by 32 percent to over $2.70 billion, while LC settlements fell by 21 percent to $2.94 billion.

When contacted, BPC Chairman Amin Ul Ahsan told Bonik Barta, “Our cost savings mainly came because global fuel prices dropped. We aligned the budget with international market conditions. Additionally, following the Energy Adviser’s recommendations, the government used competitive tenders and G2G agreements for imports, which significantly reduced transportation costs. This impact is reflected in the budget. The more competitive bidding and G2G contracts compared to before have helped lower import expenses.”

According to BPC data, over 6.37 million tons of fuel was imported in FY 2023–24. The corporation spent a total of BDT 556.63 billion. Of this amount, BDT 420.67 billion went toward importing refined fuels—diesel, petrol, octane, and jet fuel. An additional BDT 41.03 billion was spent on furnace oil, and BDT 1.07 billion on marine fuel. Crude oil imports cost BDT 93.86 billion.

For the current fiscal year, BPC has planned to import 5.91 million tons of refined fuels and 1.4 million tons of crude oil.