DHAKA, No 21, 2024 (BSS) - The Center for Policy Dialogue (CPD) has proposed an appropriate price setting model for the fuel oil in Bangladesh from the energy security and energy transition point of view.

The private think-tank recommended adopting an Artificial Neural Network (ANN)-based pricing model to establish a more stable, transparent, and equitable system. The ANN model offers a shock-absorbing mechanism at the import stage, mitigating exchange rate volatility while reflecting the socio-economic realities of the country.

According to CPD, the new model could reduce existing fuel price by Tk 10 to Tk 15 per litre.

The think-tank today came up with the new price model at a dialogue titled “Market-based Fuel Pricing: Government-led Initiatives and Possible Revision” at a hotel in the city.

Bangladesh Petroleum Corporation (BPC) Chairman (Secretary) Md Amin Ul Ahsan attended the dialogue as the special guest while Jalal Ahmed, Chairman of the Bangladesh Energy Regulatory Commission (BEFC) and Khalid Ahmed, Additional Secretary (Operation) of the Energy and Mineral Resources Division, were present as guests of honour.

Professor Dr M Shamsul Alam, Energy Advisor of the Consumers Association of Bangladesh (CAB), Humayun Rashid, Vice President of the Bangladesh Independent Power Producers’ Association (BIPPA), Engineer Mohammad Abdul Mukit, Deputy General Manager (LNG) of the LNG Division of the Rupantarita Prakritik Gas Company Limited and Abu Bakar Siddique Ali Chowdhury, Director of the EMA Power Investment Ltd attended as distinguished discussants.

 Dr Khondaker Golam Moazzem, Research Director of CPD, moderated the dialogue while Helen Mashyat Preoty, CPD Senior Research Associate and Faisal Quaiyyum, CPD Programme Associate, delivered the keynote presentation.

 Golam Moazzem said earlier the government of Bangladesh adopted an automated pricing system for fuel oils particularly diesel, petroleum, octane, kerosene and jet fuel in March 2024. 

“This decision was taken to reduce the fiscal and financial burden of the government as part of the International Monetary Fund (IMF) loan condition.
 However, this pricing formula is being criticised for a number of reasons. Hence, the revision of the government-set price is immediately required,” he added.
In this connection, he said, CPD in partnership with the Australian High Commission in Dhaka has undertaken a study on ‘Market-based Fuel Pricing Mechanism Government-led Initiatives and Possible Revision’. 

At the presentation, Helen Mashyat Preoty said that based on the findings of the study, which presents a market-based pricing model using an ANN, it is strongly recommended that the current methodology of price determination be re-determined.
 
“The adoption of the ANN-based model at the importing point, as outlined in our research, will not only simplify the pricing method but also ensure sensitivity to both fiscal constraints and consumer capabilities.

 This change is essential for fostering a balanced and equitable pricing environment, aligning with international best practices and improving transparency and fairness in pricing strategies,” she added.

She said the draft regulation prepared by Bangladesh Energy Regulatory Commission (BERC) for the fuel oil price should be approved by the ministry immediately.
“The draft mandate regarding the determination of fuel oil by BERC must be approved by the ministry. This approval will give BERC the power to determine the price of all the fuel oils,” she added.

She said as BERC has been established as a regulatory body of the power and energy sector, the full monitoring and implementation of the automated pricing model should be executed by BERC.

BERC can organize public hearings on a regular basis to ensure the transparency of the process, she added.

She said the predictive power of the ANN model also plays a crucial role in the strategic shift towards sustainable energy. 

“By providing a clear forecast of fuel costs, the model enables consumers and policymakers to plan for transitions to alternative energy sources more effectively,” she added.

She said this foresight supports long-term energy strategies, aligning financial and infrastructural investments with sustainable development goals.