Agent commission on fuel oil sales increases

Petroleum oil dealers will now get commission on a percentage basis instead of a rate set per litre, a decision that has followed the pump owners' long-standing demand and complied with the IMF's fuel pricing formula.

The Energy Division on Tuesday issued a gazette, setting agent commission at 2.85% of the selling price for diesel, 2% for kerosene, 4.34% for petrol, and 4.28% for octane.

From now on, this formula will apply to adjust fuel oil prices in the future.

This will raise petrol pumps' earnings from sales, but cause an additional Tk222 crore expense in agent commission for the Bangladesh Petroleum Corporation (BPC) at a time when the state-owned agency is struggling to foot fuel oil import bills amid dollar shortage and currency depreciation.

Until the new formula was implemented, petroleum oil traders used to receive a commission of Tk2.73 per litre on diesel, Tk1.58 on kerosene, Tk4.68 on petrol, and Tk4.82 on octane.

The commission rates were not hiked even after the massive hike in fuel prices in August last year, causing dissatisfaction among fuel oil dealers who threatened to shut pumps earlier this month.

Pump owners had been demanding an increase in commission from 3% to 4.5% of the oil price.

Now pump owners will get a commission of Tk3 per litre on diesel, Tk2.16 on kerosene, Tk5.18 on petrol, and Tk5.32 on octane.

A senior official at the Energy Division said the International Monetary Fund (IMF) has conditions for introducing a system of automatic determination of fuel oil prices in coordination with the international market.

"In order to create this formula, the agent commission and transportation fares must be in a fixed form," the official told The Business Standard.

Allowing market to determine fuel oil price through a permanent formula was one of the conditions attached to IMF's $4.7 billion loan support, whose first tranche of $476.27 million was disbursed in February.

On 2 September, the Bangladesh Petrol Pump Owners Association stopped receiving oil from depots on multiple demands, including an increase in agent commissions and transport fares. They also announced to go for a strike if their demands were not met by 30 September.

The BPC assured them of implementing their demands.

The association welcomed the percentage-based commission.

President of the association, Syed Sazzadul Karim Kabul, told TBS, "For a long time, pump owners have been demanding the determination of commissions on a percentage basis. In this case, pump owners will get commissions in proportion to the investment. Which will help the business survive."

He said, in most countries, the percentage of commission is fixed. The introduction of this system will facilitate pricing in an international manner.