ERL's expansion costs
The report on the matter was published in most dailies on 11th July. The cost figure was indicated at around US$867 million in total, covering both foreign exchange needed and also the equivalent local taka, that is needed. This comes to Taka 606.9 crore (based on 1$=Tk70). If we consider a liberal interest rate of say 5 percent for financing this expansion, based on repayment period of say ten years, the additional cost of refining will be around 20 paisa per litre on the total refining capacity after expansion to 4.5 million ton annually!
On the face of it, it appears to be fairly reasonable, however, another very important issue, related to product pricing, can also be taken up alongside the additional refining cost. This is related to the subsidy, provided by the government. I believe there must be no subsidy for motor spirit, aviation turbine fuel and furnace oil. These products are used in industry and other modes of transportation used normally by well-off people, who should not be provided with such subsidies through fuel prices.
Subsidy may only be considered for high-speed diesel and kerosene; which is mostly used by rural people, for irrigation, farming and household lighting. Under the same logic; we should do away with providing subsidy to natural gas. Its price should be in line with the available heat basis per unit of gas (based on calorific value), with traditional liquid fuel or coal. The low price of natural gas should be rationalized upwards step by step, say by 10 or 15 percent increases yearly over the next five years or so. This fuel is used mostly in urban areas, where the people are comparatively much better off in many respects compared to our rural fellow citizens. Same is the logic for industrial usage for heating or power generation, as it adds to the operating profits of the industries owned by rich people.
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