A market-based pricing mechanism that includes an Artificial Neural Network (ANN)-based model has been recommended by the Centre for Policy Dialogue (CPD) to lower fuel prices in Bangladesh by BDT 10-15 per litre. CPD emphasised the model’s potential to bring down consumer costs and provide better predictive power for future fuel pricing adjustments.
The recommendation emerged during the dialogue titled Market-based Fuel Pricing: Government-led Initiatives and Possible Revision, held on Thursday 21 November, 2024. The session was moderated by Dr Khondaker Golam Moazzem, Research Director of CPD, who emphasised the flaws in the existing pricing methodologies and the urgent need for reform.
The key recommendations included adopting a shock-absorbing methodology at the import stage to reduce the impact of exchange rate fluctuations and revising fixed proportions in pricing formulas based on distribution companies’ income statements and real inflation rates. CPD also urged the immediate approval of the Bangladesh Energy Regulatory Commission’s (BERC) draft mandate to regulate fuel oil pricing.
‘We have implemented an automatic distribution system from the seaport to the distribution points to minimise system losses and prevent theft’ highlignhted the Chairman (Secretary), Bangladesh Petroleum Corporation (BPC), Mr Md. Amin Ul Ahsan. He added ‘Efforts to construct the second refinery have been ongoing for a long time, but due to capital shortages, there have been delays’.
Mr Jalal Ahmed, Chairman, Bangladesh Energy Regulatory Commission, stated ‘We will re-examine the annual reports of all companies under the Power and Energy Ministry. To ensure transparency and safeguard consumer interests, we plan to engage a third party to thoroughly review the reports of approximately 50 companies and identify any illogical expenditures’.
Mr Khalid Ahmed, Additional Secretary (Operation), Energy and Mineral Resources Division, remarked, ‘Most of the depot employees are millionaires. Digitisation is the only viable solution to reduce system losses and other expenditure.
‘BPC is involved in the business of petroleum products, and there is no reason to consider BPC as the regulator of prices’, remarked Professor Dr M. Shamsul Alam, Energy Advisor to the Consumers Association of Bangladesh (CAB). He questioned the standard BPC uses for setting or proposing prices, asking, ‘Who has established this standard for them?’ This question, he noted, remains unanswered.
Mr Humayun Rashid, Vice President, BIPPA emphasised that energy security is the top priority for investors. When gas supplies are disrupted, they forced to switch to CNG to run boilers, making the issue of market-based fuel pricing irrelevant. He added that while BPC profits from locally sourced condensate, consumers carry the burden of high prices.
Mr Abu Bakar Siddique Ali Chowdhury, Director, EMA Power Investment Ltd, noted that prices set by BPC or BERC in Bangladesh are not truly market-based, as demand and supply dynamics are absent. Citing Obamacare as an example of market-driven government intervention to counter unethical pricing, he emphasised the need for the government to clearly define BPC’s role.
In his introductory remarks, Mr Clinton Pobke, Deputy Head of Mission, Australian High Commission, Bangladesh, said ‘Effective evidence-based policy relies on empirical data, economic theory, local and international experiences, and clear communication to foster debate. Translating analysis into policy requires balancing expert advice, political realities, stakeholder interests, and the human dynamics of decision-making’.
The keynote presentation was delivered by Ms Helen Mashiyat Preoty, Senior Research Associate, CPD and Mr Faisal Quaiyyum, Programme Associate, CPD. They emphasised that the current pricing formulas used by both BERC and the Bangladesh Petroleum Corporation (BPC) should be reviewed to eliminate confusing variables and ensure consistency with international standards. Furthermore, they stressed the importance of implementing transparent practices, including regular public hearings by BERC, to increase accountability in the pricing process.
In the closing statement, Dr Khondaker Golam Moazzem, emphasised that adopting the ANN approach could effectively mitigate the impacts of exchange rate fluctuations and other market shocks, leading to a more stable and equitable fuel pricing system.