Fuel prices raised to prevent smuggling to neighbouring country: State minister

Highlights 

• Fuel prices were raised to curb smuggling to neighbouring countries.
• BPC incurred Tk22,875 crore in losses from March to August.
• Diesel prices rose amid the ongoing Middle East crisis.
• Bangladesh imports around 7 million tonnes of petroleum products annually.
• The minister said subsidies could disrupt social safety-net programmes.
• Govt raised fuel prices 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 today (21 September).

Speaking at a press briefing at the Secretariat, the state minister said the government had avoided adjusting fuel prices as long as possible, but soaring international oil prices, freight and insurance costs had left it with little room to continue absorbing the losses.

"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.

The state minister said the government had already allowed BPC to absorb substantial losses by keeping domestic fuel prices unchanged despite rising international prices.

According to him, BPC incurred losses of around Tk22,875 crore between March and August 2026 as the government refrained from adjusting fuel prices, resulting in an average monthly loss of around Tk3,813 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 Tk170 per litre, while the domestic price before the latest adjustment was Tk115 per litre.

This meant BPC was effectively bearing a gap of around Tk55 per litre on diesel, according to the minister.

Even after the latest price adjustment, BPC will have to bear an effective subsidy of around Tk15 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 Tk40,000 crore. For all petroleum products combined, it could have reached around Tk50,000 crore," Amit said.

Pressure on social safety net

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 state minister said the government wanted to bring economically vulnerable families under the proposed family-card programme, under which eligible households would receive Tk2,500 a month.

Amit said the government had to balance the cost of fuel subsidies against spending on social protection and essential public services.

He also expressed hope that people would understand the circumstances behind what he described as an unpopular decision.

Smuggling risk

The minister also highlighted the widening gap between Bangladesh's fuel prices and those in other countries in the region.

According to figures cited by him, diesel is currently priced at around Tk134.76 per litre in Kolkata, Tk164.38 in Myanmar, Tk161.24 in Nepal, Tk179.42 in Sri Lanka, Tk151.22 in Thailand, Tk137 in Vietnam, Tk140 in the Maldives, Tk168.53 in the Philippines, Tk185.48 in Pakistan and Tk122.79 in the United Arab Emirates.

As a result, Bangladesh had one of the lowest diesel prices in the region, creating an incentive for fuel to be diverted across the border, the state minister said.

"This created a major risk of smuggling fuel purchased with the hard-earned foreign currency of our expatriate workers to neighbouring countries," he said.

Amit said Bangladesh had to spend a significant amount of its foreign currency reserves to import petroleum products. Selling the imported fuel at substantially lower prices than neighbouring countries, therefore, created a risk of subsidised fuel flowing out of the country.

The latest price adjustment was thus aimed not only at addressing BPC's financial losses but also at preventing the misuse of foreign exchange through fuel smuggling, he said.

Middle East crisis

The state minister said the government had been forced to raise fuel prices due to the ongoing crisis in the Middle East.

The latest adjustment comes as the international oil market remains highly volatile amid the continuing conflict in the region.

The disruption to major energy routes, including the Strait of Hormuz and Bab el-Mandeb, has increased commodity prices and transportation costs, putting additional pressure on fuel-importing countries such as Bangladesh.

The government has also been trying to secure uninterrupted fuel supplies amid the crisis.

Amit said the government had not wanted to take the decision unless there was no alternative.

"Unless there was no alternative, the government did not want to take such an unpopular decision," he said, explaining the rationale behind the latest adjustment.