The BNP-led government is reportedly moving to privatise the import and marketing of refined petroleum products. At present, the state-owned Bangladesh Petroleum Corporation (BPC) is responsible for importing and marketing refined fuel oil in the country. If the new initiative is implemented, private companies will also be allowed to enter the business. Previously, the Awami League government also took steps to open the fuel oil business to the private sector. To this end, it issued the “Policy for the Establishment of Private Refineries and Import, Storage, Processing, Transportation and Marketing of Crude Fuel Oil, 2023” on November 20, 2023. Under this policy, on June 10, 2024—less than two months before the AL government’s fall—the Bashundhara Oil and Gas Company Ltd (BOGCL) was given permission to import, refine and market crude fuel oil.
According to a 2024 report by Prothom Alo, that permission was subject to a number of conditions, including i) reaching an agreement with the BPC on operations and sales, ii) paying BPC a security deposit, iii) selling 60 percent of its output to the BPC and the rest through its own network for the first three years; and iv) the scope for selling up to 50 percent of the produced fuel to the BPC over the next two years. The BOGCL could also appoint 388 filling stations or distributors nationwide, including CNG and LPG stations without fuel-selling permits, while dealers of BPC subsidiaries Jamuna Oil Company, Padma Oil Company and Meghna Petroleum could switch to BOGCL’s network.
However, following the political changeover in August 2024, the process of allowing BOGCL to directly import and market fuel oil did not move forward. Currently, the company operates a refinery in Keraniganj, from which the diesel produced as a by-product is supplied to the BPC for distribution, while the furnace oil and bitumen produced there are marketed directly by BOGCL through its own network.
This time around, the plan is not about crude oil import and refining; rather, it is about allowing private companies to import, store, transport, distribute and market refined fuel directly. To formulate a new policy, the Energy and Mineral Resources Division (EMRD) gave the BPC only four days to prepare a draft. Questions have been raised over whether this haste is intended to create an opportunity for Bashundhara to enter the fuel oil business. Here, it should be noted that a few other companies sought permission to establish crude oil refineries, according to a report by Samakal.
The same report says that on May 24 this year, Sayem Sobhan Anvir, chairman of Anvir Bashundhara Group (ABG), a subsidiary of Bashundhara Group, wrote to the government seeking permission for the BOGCL, which operates under ABG, to independently import, sell and market refined fuel oil. Following this application, an 11-member committee was formed via an EMRD order on July 14, with the BPC’s director of operations as its convener. The committee was tasked to assess the commercial viability of BOGCL’s proposed annual imports—15-20 lakh tonnes of diesel, two lakh tonnes of octane, 1.5 lakh tonnes of petrol, and 8-10 lakh tonnes of furnace oil—as well as its proposed marketing structure. It was also asked to analyse the potential impact of allowing the BOGCL to do so on the market share, revenue and business operations of the BPC and its subsidiaries Jamuna Oil Company, Padma Oil Company, and Meghna Petroleum.
According to a report by The Business Standard, the committee recommended against privatising the fuel oil business in its report submitted on July 21. Just five days later, BPC Chairman Rezanur Rahman was removed from his post and made an officer on special duty (OSD).
Then, on August 6, the EMRD instructed the BPC to prepare and submit, by August 10, a draft of the “Policy for Private Sector Import, Storage, Transportation, Distribution and Marketing of Refined Fuel Oil, 2026.”
Questions have since been raised over whether the government initiative is driven more by national energy security and consumer interests or by business interests. The energy ministry, however, said the move is not intended to benefit any particular person, company or group, but to ensure energy security, uninterrupted supply, and a transparent and competitive market.
However, past experience with privatisation in Bangladesh makes it difficult to accept the ministry’s assurance. Private power generation has raised costs through hefty capacity payments, while private-sector LPG imports and marketing have also been problematic. Although the government sets LPG prices, companies often sell at much higher prices. What will prevent the same from happening in the case of fuel oil? Who will ensure that private companies will not seek to sell refined petroleum products at higher rates, citing global market prices, as they do with edible oil or sugar?
It is argued that private sector participation in fuel import and marketing will improve efficiency and reduce costs. But international experiences show that it can result in artificial shortages, higher prices, neglect of rural and less profitable areas, and a greater subsidy burden on the public.
During the Covid pandemic, when global oil prices fell, private oil marketing companies (OMCs) in Pakistan created an artificial petrol shortage in 2020, anticipating higher prices. A government investigation found that most OMCs had adequate stocks but reduced or halted supplies to petrol stations, with some withholding 17-64 percent of their stocks. Some also violated the 20-day minimum stock requirement, citing fears of losses. To manage the crisis, state-owned Pakistan State Oil (PSO) had to rapidly import additional fuel at substantial losses. Its share of petrol supply rose from the usual 36 percent to 55.5 percent.
In Kenya, private OMCs came under fire in April 2022 for failing to maintain minimum stocks and creating an artificial shortage ahead of price increases. Companies are required to hold at least 20 days of petrol and 25 days of diesel stocks, but some reportedly withheld supplies amid price uncertainty. Similar allegations resurfaced in 2026, with private OMCs accused of rationing fuel in anticipation of higher prices.
In the Philippines, fuel imports and sales were privatised through the Downstream Oil Industry Deregulation Act of 1998. Privatisation was justified on the grounds that competition would ensure fuel at the lowest possible prices. In practice, however, deregulation did not eliminate the risk of anti-competitive behaviour; allegations of price-fixing and cartelisation have persisted. Weaknesses in the legal and regulatory framework have made it difficult for the Department of Energy to take effective action against the oil cartels.
Bangladesh has seen similar behaviour by private companies that import LPG and edible oil. Government regulators have been unable to take effective action against them. There is no reason to believe that the same would not happen in the case of refined fuel oil. For private companies, profit maximisation could take precedence over keeping the economy running. As international oil prices rise, domestic prices would have to rise accordingly—or the government would have to provide substantial subsidies. Companies could also form cartels, create artificial shortages, and sell fuel above the prices set by the government. If there is uncertainty over prices, they may delay imports. The BPC would then face additional pressure to meet the national demand and would have to import more fuel, potentially at a loss.
There is another major risk. The state-owned Eastern Refinery is undertaking an investment of Tk 35,465 crore to increase its annual crude oil refining capacity to 45 lakh tonnes from the current capacity of 15 lakh tonnes. If private companies are allowed to import large quantities of refined fuel oil and supply to the domestic market, Eastern Refinery could face difficulties marketing its refined products. Its second unit could consequently become a stranded asset.
From an economic perspective, importing crude oil and refining it domestically is more cost-effective than importing refined petroleum products, while also reducing pressure on the country’s limited foreign exchange reserves. Allowing private companies to directly import refined fuel would undermine the opportunity to save foreign currency by importing crude and refining it at Eastern Refinery.
Fuel oil is a strategic commodity directly linked to the functioning of the economy as well as the daily lives of citizens. It should not be opened up to profit maximisation by private companies. Global experiences show that in the absence of strong regulatory oversight and accountability, private companies may withhold stocks to create artificial shortages or reduce imports when market conditions are unfavourable. When such problems arise, the state ultimately has to bear the responsibility for national energy security.
Hence, instead of privatising the fuel oil business, the government should improve the efficiency of BPC’s import, storage and marketing operations while ensuring transparency, accountability and corruption-free management. Privatisation is not the remedy to weaknesses in state-owned institutions—making the institutions more efficient, transparent and accountable is.
Kallol Mustafa is an engineer and writer who focuses on power, energy, environment, and development economics. He can be reached at [email protected].
Views expressed in this article are the author's own.
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