'BPC liability creates liquidity crisis in banking'

Dhaka, June 9: Bangladesh Finance Minister M Saifur Rahman has said the liability of the Bangladesh Petroleum Corporation (BPC), the lone importer of petroleum products, has risen to 10,500 crore Takas, therby creating a liquidity crisis in the banking system.

''Due to the selling of petroleum products in the domestic market at a lower rate than the imported one, the liability of the BPC, has been rapidly increasing to an unsustainable level,'' Mr Rahman said in his budget speech yesterday.

He said steps were taken to tackle the situation temporarily by injecting funds into banks from the government budget.

''The macro-economic stability is threatened because of pursuing the policy of not aligning the domestic petroleum prices with international market price. We have no other alternative, but to adjust domestic petroleum price realistically,'' Mr Rahman said.

Recently, the Finance Minister said the prices of petroleum and its products had spiralled upwards abnormally. ''Other countries, including the neighbours, have raised their oil prices,'' he added.

Mr Rahman said he has extensively consulted renowned economists, leading businessmen and civil society members on the issue and all of them unanimously agreed that the hike in oil prices was necessary and unavoidable.

He said the government was continuously increasing energy production and its utilisation. ''To meet the increased demand of gas, a total of 25 projects are being implemented for exploration, production and transmission of gas,'' the Finance Minister added.

In the Bangladesh Economic Review (BER), 2006, it was stated that the loss of the BPC, which stood at 1462.14 crore Takas between July 2005 and December 2006, was due to the sale of petroleum at a lower price in the domestic market.

However, it stood at Tk 2,745.77 crore for the fiscal 2004-05 and Tk 3,087 crore in 2003-04 respectively.

UNI