The New Nation - Internet Edition

BUSINESS REPORT

The government is likely to raise fuel oil prices any moment this week in the wake of growing losses incurred by the state-owned Bangladesh Petroleum Corporation (BPC).

Sources at the Ministry of Energy and Mineral Resources told The New Nation yesterday that the government would announce shortly about the price hike of fuel oils as the BPC, the sole oil importer and distributor, has proposed fuel price increases of 37-80 per cent..

'We are examining the proposal regarding the extent of the price hike and the decision will be taken at the highest level very soon,' said Dr M Tamim, Special Assistant to the Chief Adviser for the Ministry of Energy and Mineral Resources.

He said that without a price hike, the government would have to dish out about $1.5 billion to cover its oil company's losses in the 2007-2008 fiscal year. The government, however, would try to soften the impact on its farming sector with around Tk 20 billion ($292 million) in farm subsidies, Tamim said.

Sri Lanka, another South Asian nation, on Sunday raised fuel oil prices to contain mounting losses at state-owned oil retailers, just a day after Indonesia raised fuel prices to cap ballooning fuel subsidies.

India, Asia's third-largest economy and the world's second most populous nation, is considering such a move.

Sri Lanka raised kerosene, petrol and diesel prices by between 14 and 47 percent.

Governments across Asia have tried to soften the impact of a global surge in food and energy prices on their populations by keeping domestic prices of fuel and food staples below international levels.

But with oil powering to fresh records almost every week, the last one above $135 a barrel, several nations feel they can no longer fully subsidise consumers or cover soaring losses of state-controlled oil importers and retailers.

The chairman of Sri Lanka's Ceylon Petroleum Corp. said that this weekend's fuel price increase would allow the company merely to halve its losses from 175 million Sri Lanka rupees ($1.62 million) a day.

"Even after the increase we are still in the negative t. what we have done is we basically brought it to levels that we can manage," Ashantha de Mell told Reuters.

Oil retailer and subsidiary of Indian Oil Lanka IOC also raised diesel and fuel prices this week.

Both Bangladesh and Sri Lanka grapple with double-digit inflation and swelling trade deficits driven by increasingly costly food and oil imports.