Fuel Prices Raised To Prevent Smuggling To Neighbouring Country: State Minister

⛽ The government had to raise fuel prices to prevent petroleum products purchased with expatriate Bangladeshis' hard-earned foreign currency from being smuggled to neighbouring countries, while also containing losses at the Bangladesh Petroleum Corporation (BPC), State Minister for Power, Energy and Mineral Resources Anindya Islam Amit said at a press briefing at the Secretariat on September 21.

📊 "We were at risk of fuel purchased with the hard-earned foreign currency of expatriate Bangladeshis being smuggled to a neighbouring country. To continue the government's social safety-net programmes and prevent fuel from being smuggled to a neighbouring country, the government had to adjust fuel prices," he said. Amit said the ongoing crisis in the Middle East had further pushed up international fuel prices while also increasing marine insurance premiums and freight charges. "The crisis has taken a new turn almost every day," he said, adding that the situation was making fuel imports increasingly expensive for Bangladesh.

💰 Loss Economics: Tk 50,000 Crore Projected Without Adjustment

According to the minister, BPC incurred losses of around Tk 22,875 crore between March and August 2026 as the government refrained from adjusting fuel prices, resulting in an average monthly loss of around Tk 3,813 crore. Bangladesh currently imports around 7 million tonnes of petroleum products annually, of which about 4.5 million tonnes are diesel, he said. Internationally, diesel is currently costing around Tk 170 per litre, while the domestic price before the latest adjustment was Tk 115 per litre.

• 💰 BPC losses (March-August): Tk 22,875 crore
• 💰 Monthly average loss: Tk 3,813 crore
• 📊 Annual imports: ~7 million tonnes (4.5m diesel)
• 💰 International diesel price: ~Tk 170/litre
• 💰 Pre-hike domestic diesel: Tk 115/litre
• 💰 Gap per litre: ~Tk 55
• 💰 Post-hike domestic diesel: Tk 135/litre
• 💰 Remaining subsidy: ~Tk 15/litre
• 💰 Projected annual loss without adjustment: Tk 40,000 crore (diesel only)
• 💰 All products combined: ~Tk 50,000 crore

This meant BPC was effectively bearing a gap of around Tk 55 per litre on diesel, according to the minister. Even after the latest price adjustment, BPC will have to bear an effective subsidy of around Tk 15 per litre on diesel, he said. "If we had not adjusted the price, the annual loss or subsidy on diesel alone would have been around Tk 40,000 crore. For all petroleum products combined, it could have reached around Tk 50,000 crore," Amit said.

👥 Social Safety Net Programmes At Risk

Amit said continuing to provide such a large subsidy would put pressure on the government's ability to finance its social safety-net programmes. "If we continue this subsidy only for fuel oil, the government's ongoing social protection programmes will be severely disrupted," he said. He cited allowances for people with disabilities and widows, the proposed family-card programme for low-income households, free medicines at government hospitals and the Expanded Programme on Immunisation (EPI) as programmes that could come under pressure if the government continued bearing the rising fuel subsidy.

The explicit linkage between fuel subsidy reduction and social safety net programme sustainability provides the political framing for the price hike. Rather than presenting the adjustment as a fiscal necessity alone, the minister positioned it as a choice between fuel subsidies for all consumers (including those who can afford market prices) and targeted welfare programmes for the most vulnerable populations. This framing — subsidising the poor through targeted programmes rather than universal fuel subsidies — aligns with international best practice in subsidy reform.

🌏 Strategic Context: Subsidy Reform Trajectory

For Bangladesh's broader fiscal management, the state minister's disclosure that even after the Tk 20/litre adjustment, a Tk 15/litre subsidy on diesel remains — signals that the fuel price reform is partial, not complete. The government has reduced the subsidy gap from Tk 55 to Tk 15 per litre, but has not eliminated it. This phased approach reflects political sensitivity to fuel prices, but also means that BPC will continue incurring reduced (but still substantial) losses.

The Tk 50,000 crore projected annual loss across all petroleum products — had prices not been adjusted — would have been equivalent to approximately 1.2% of Bangladesh's GDP. The government's decision to absorb Tk 22,875 crore in actual losses over six months before adjusting prices demonstrates the fiscal cost of the delay — a cost that ultimately constrained social spending and forced the adjustment. The coming months will reveal whether the Tk 15/litre remaining subsidy is sustained or whether further adjustments are needed as international prices continue to evolve with the Middle East conflict.