Fuel Price Hikes in Bangladesh: The Need for a Transparent and Balanced Policy
Bangladesh has once again raised fuel prices. Effective September 21, 2026, diesel has increased from Tk 115 to Tk 135 per litre, octane from Tk 145 to Tk 165, petrol from Tk 140 to Tk 160, and kerosene from Tk 135 to Tk 155.
In a single adjustment, the prices of all four fuels have risen by Tk 20 per litre.
The government’s principal justification is the rise in international oil prices and the substantial losses incurred by the Bangladesh Petroleum Corporation (BPC).
According to BPC, it incurred losses of approximately Tk 22,876 crore on fuel imports between March and August. International oil prices also rose significantly during this period.
The issue, however, should not be reduced to a simple question of whether fuel prices should be increased.
The more important questions are: How much of the additional cost should consumers bear? How much should the government absorb? And how much pressure can be reduced through better management, cost control and tax adjustments?
There are legitimate economic reasons for adjusting fuel prices. Bangladesh remains heavily dependent on imported petroleum.
In fiscal year 2025–26, the country reportedly spent around US$10.63 billion on fuel imports—more than twice the amount spent in the previous fiscal year. Rising international oil prices therefore increase import costs and place additional pressure on foreign exchange.
BPC’s financial position has also become increasingly constrained. At the beginning of September, its available working capital was reportedly around Tk 12,368 crore.
The corporation aims to maintain a reserve equivalent to at least two months of import expenditure as a financial safety buffer.
Under these circumstances, the need for some adjustment in domestic fuel prices cannot simply be dismissed.
But that does not necessarily answer another important question: Was a uniform Tk 20-per-litre increase in all four fuels the most appropriate policy response?
Diesel Requires Special Consideration
Diesel is fundamentally different from petrol and octane because of its importance to the productive economy.
It is extensively used in agriculture, freight transportation, industry and inland water transport. Diesel accounts for a large share of Bangladesh’s total fuel consumption and is particularly important for agricultural irrigation.
Consequently, an increase in diesel prices does not affect only vehicle owners. It raises irrigation costs for farmers, transportation costs for trucks and vessels, and production costs for industries. These additional costs eventually pass through to the prices of food and other essential goods.
At a time when inflation is already putting considerable pressure on household budgets, a sharp increase in fuel prices can intensify the cost-of-living burden.
This is why the entire burden of BPC’s losses should not automatically be transferred to consumers.
Look Beyond the Pump Price
The retail price of fuel is determined by more than its international purchase price. Duties and taxes, transportation, storage, refining and other costs are also incorporated into the final price.
BPC has indicated that its tax burden has increased because duties and taxes are calculated on the basis of the actual invoice value of imported petroleum products.
If raising consumer prices is one way to reduce BPC’s losses, the government should simultaneously examine other options: restructuring duties and taxes, reducing import-related costs, expanding storage capacity and improving BPC’s financial and operational efficiency.
Simply increasing pump prices without making BPC’s accounts and pricing mechanism sufficiently transparent cannot be a sustainable long-term solution.
Automatic Pricing Must Be Transparent and Two-Way
Bangladesh has introduced a mechanism for adjusting fuel prices in response to international market movements. Such a system can work effectively only when its methodology is transparent.
If domestic fuel prices rise when international prices rise, they should also fall when international prices decline. Price adjustment must operate in both directions.
A clearly defined formula could take into account international oil prices, the exchange rate, import costs, duties and taxes, transportation, storage and other relevant expenses. The formula, along with the major components of the calculation, should be disclosed regularly to the public.
Greater transparency would make the pricing system more predictable and reduce public uncertainty and controversy.
Not All Fuels Have the Same Economic Impact
A uniform pricing approach may overlook the very different economic roles played by different fuels.
Petrol and octane are used predominantly by private vehicles, while diesel is deeply integrated into agriculture, transportation and industrial production.
Therefore, fuel policy should consider not only the financial cost of each product but also its wider economic and social impact.
Targeted assistance for diesel used in agriculture and public transportation could be considered. Rather than subsidizing fuel consumption broadly, support could be directed toward sectors that are essential to food production, public mobility and economic activity.
Such an approach could help protect vulnerable sectors without placing an excessive burden on the state budget.
Three Challenges, One Balanced Policy
The government currently faces three interconnected challenges:
1. Protecting BPC from unsustainable losses;
2. Reducing pressure on foreign exchange caused by fuel imports; and
3. Protecting households and productive sectors from excessive inflationary pressure.
Achieving all three objectives requires more than simply raising fuel prices.
A balanced strategy could include gradual price adjustments during periods of extraordinary international volatility, targeted support for essential sectors, a review of duties and taxes, stronger cost management at BPC, and increased fuel storage capacity.
In the longer term, Bangladesh must reduce its dependence on imported energy by investing in domestic gas exploration, renewable energy, energy-efficient technologies and reliable public transportation.
Beyond the Question of Price
The increase in international oil prices and BPC’s substantial losses are real economic challenges. Some adjustment in domestic fuel prices may therefore be unavoidable.
But fuel is not an ordinary commodity. Its price affects transportation, agriculture, industry, food production and ultimately the overall cost of living.
The more important question, therefore, is not simply whether fuel prices should rise, but how much they should rise, who should bear the additional cost, which sectors require protection, and how the government can distribute the burden fairly and transparently.
Bangladesh needs a fuel-pricing policy that is transparent, predictable and balanced—one that recognizes international market realities while protecting the productive capacity of farmers, workers, low-income households and businesses.
Fuel prices are not merely about the price of fuel. They are one of the foundations of the country’s entire economic price structure.
(The writer is an Economist,
Social and State Thinker, and
Human Rights Activist)
