Fuel oil subsidy reforms and oil market deregulation in Bangladesh

This report examines the challenges of fuel oil subsidies and the lack of a strategic pricing mechanism in Bangladesh. It highlights how government control over oil prices, driven by political considerations, creates financial burdens for the state and the Bangladesh Petroleum Corporation (BPC), potentially hindering the country's goal of achieving 8% GDP growth.

• The energy sector is a major constraint to Bangladesh's goal of achieving an 8% GDP growth rate by the end of the Seventh Plan (FY2019-20). Specifically, fuel oil subsidies create a heavy financial burden that limits government spending on health, education, and social protection, while causing the national oil company, the Bangladesh Petroleum Corporation (BPC), to accumulate debt.
• Future oil demand in Bangladesh is expected to increase rapidly due to three structural factors: the expansion of the energy-intensive manufacturing sector to support GDP growth, increasing urbanisation, and a growing reliance on imported oil as domestic gas reserves decline.
• Bangladesh's domestic oil pricing is heavily regulated by the government and the BPC, with prices set based on political sensitivity rather than cost. Diesel, kerosene, and furnace oil are typically subsidised because they are used for irrigation, rural lighting, and power generation, whereas octane and petrol are taxed as they are used primarily by the wealthy.
• Attempts to implement an automatic oil pricing mechanism to pass through international price changes have failed due to political fears. While the Bangladesh Energy Regulatory Commission (BERC) was established in 2003 to regulate prices, it lacks autonomy and is guided by the government. A similar attempt in 2012 under an IMF Extended Credit Facility Arrangement also failed to be implemented.

APA

Climate and Development Knowledge Network (2017). Fuel oil subsidy reforms and oil market deregulation in Bangladesh. https://cdkn.org/resource/report-fuel-oil-subsidy-reforms-oil-market-deregulation-bangladesh

Chicago

Climate and Development Knowledge Network. Fuel oil subsidy reforms and oil market deregulation in Bangladesh. 2017. https://cdkn.org/resource/report-fuel-oil-subsidy-reforms-oil-market-deregulation-bangladesh.

Wikipedia

{{cite report |author=Climate and Development Knowledge Network |title=Fuel oil subsidy reforms and oil market deregulation in Bangladesh |date=14 June 2017 |url=https://cdkn.org/resource/report-fuel-oil-subsidy-reforms-oil-market-deregulation-bangladesh |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climateanddevelopmentknowledgenetwork2017fuel, author = {{Climate and Development Knowledge Network}}, title = {{Fuel oil subsidy reforms and oil market deregulation in Bangladesh}}, institution = {Climate and Development Knowledge Network}, year = {2017}, month = jun, url = {https://cdkn.org/resource/report-fuel-oil-subsidy-reforms-oil-market-deregulation-bangladesh}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }