Will Private Sector Participation Boost Competition or Create a New Fuel Syndicate?

Bangladesh’s economic growth depends heavily on a reliable and uninterrupted supply of energy. Fuel is essential for industrial production, agricultural irrigation, transportation, electricity generation, and almost every major economic activity.

Therefore, the supply and price of fuel are not merely commercial issues. They are directly linked to the cost of living, industrial production costs and overall economic stability.

For decades, state-owned institutions have played the dominant role in importing, storing and marketing petroleum products in Bangladesh. The Bangladesh Petroleum Corporation (BPC) has remained the central institution in this system.

However, growing energy demand, fluctuations in international oil prices and the need for faster and more flexible supply have created pressure for reform. Against this backdrop, the government’s plan to involve the private sector in fuel imports could represent a significant policy shift.

At a seminar organised by the Forum for Energy Reporters Bangladesh on Tuesday (August 11), Power, Energy and Mineral Resources Minister Iqbal Hasan Mahmud Tuku said the government had formulated a unified policy to involve private-sector companies in fuel imports and marketing.

Under the proposed framework, qualified private companies would be allowed to import petroleum products alongside state-owned entities.

The government believes greater private-sector participation could increase competition and strengthen the country’s fuel supply system. But a key question remains: Will private participation genuinely create competition, or could weak regulation lead to the emergence of new market syndicates?

The Potential for Greater Competition
Allowing multiple private importers to enter the market could create alternative sources of fuel supply.

When an import system depends heavily on a limited number of entities, delays in procurement, decision-making or transportation can quickly affect the wider market. A larger number of importers could reduce the risk of a nationwide shortage caused by problems at a single institution.

Private companies may also have greater flexibility in responding to international market conditions. They could potentially make faster purchasing decisions when global prices fall, identify alternative suppliers or negotiate more competitive transportation arrangements.

Greater competition could therefore improve import efficiency and potentially reduce costs.

However, these benefits will depend largely on whether a sufficient number of qualified companies are allowed to participate.

Energy Security Must Remain the Priority
Fuel cannot be treated like an ordinary consumer commodity.

Even a temporary disruption in fuel supplies can affect industries, transportation, agriculture and power generation. Therefore, allowing private companies to import fuel must be accompanied by adequate strategic reserves at the national level.

If a private importer reduces purchases because international prices rise, the country must have a reliable backup mechanism to prevent shortages.

The role of BPC could therefore become even more important. Rather than directly managing every aspect of the fuel business, the state-owned corporation could focus more strongly on strategic reserves, emergency supplies and national energy security.

Opportunity for Infrastructure Investment
Private-sector participation could also encourage investment in fuel infrastructure.

New importers may invest in terminals, storage facilities, pipelines, transportation networks and refineries. This could increase the country’s storage and distribution capacity while reducing pressure on the government to finance all infrastructure projects.

Modern and larger storage facilities could also allow Bangladesh to purchase fuel when international prices are favourable and store it for future use.

Transparency in Fuel Pricing Is Essential
One of the biggest questions surrounding private fuel imports is how prices will be determined.

A transparent pricing mechanism should take into account international prices, import costs, transportation, storage expenses, taxes and reasonable business margins.

Without clear rules, private imports could potentially create opportunities for excessive pricing, artificial shortages or excessive profits.

Transparency must therefore extend across the entire supply chain, from procurement to retail sales.

Pressure on Foreign Exchange
Although private companies may finance fuel imports independently, their activities will still have an impact on Bangladesh’s overall foreign-exchange market.

Excessive or unnecessary imports could increase demand for US dollars and put additional pressure on the foreign-exchange market.

Private fuel imports should therefore not be viewed as an isolated commercial activity. The government should maintain appropriate coordination regarding import volumes, timing and sources.

Avoiding a Private Monopoly
Perhaps the biggest concern is that a state monopoly could simply be replaced by a private monopoly.

If only a handful of large companies are allowed to control the market, genuine competition may not emerge. Instead, the country could face new risks involving market concentration, stockpiling, price manipulation and cartelisation.

This could ultimately deny consumers the benefits expected from private-sector participation.

Licensing should therefore be based on transparent criteria, including financial strength, infrastructure, storage capacity, technical capability and experience in international trade.

Strong Monitoring and Disclosure
Transparency will be critical if private companies are allowed to import fuel.

Import prices, sources, transportation costs, storage expenses and other charges should be subject to verification and, where appropriate, public disclosure.

Regular audits and effective monitoring could significantly reduce the scope for irregularities.

The Ministry of Energy, relevant regulatory authorities, the Bangladesh Competition Commission and other stakeholders should also establish a coordinated monitoring mechanism.

Any evidence of hoarding, artificial shortages or market manipulation should trigger swift regulatory action and appropriate penalties.

What Can Bangladesh Learn from India?
India offers an example of a fuel market where state-owned and private companies operate alongside one another.

Companies such as Reliance Industries and Nayara Energy import crude oil, operate refining facilities and supply petroleum products to the domestic market, while also participating in international trade.

However, Bangladesh cannot simply replicate the Indian model.

India has a much larger consumer market, extensive refining capacity, major port infrastructure and a significantly larger petroleum industry.

Bangladesh should instead study India’s experience and develop a model suited to its own market size, infrastructure and energy requirements.

Expanding Domestic Refining Capacity
In the long term, Bangladesh could also consider reducing its dependence on imported refined petroleum products by expanding domestic refining capacity.

Importing crude oil and refining it domestically could create greater value addition, support industrial development and generate employment.

However, establishing new refineries, terminals, storage facilities and pipelines would require substantial investment. Public-private partnerships could play an important role in developing such infrastructure.

The State’s Role Must Evolve
Greater private-sector participation does not mean a weaker state.

On the contrary, the government’s regulatory role would become even more important.

The state must determine who can import fuel, how much they can import, where it can be stored, how much strategic reserve must be maintained and how retail prices should be calculated.

The government does not necessarily need to operate every commercial activity directly. Its key responsibility should be to establish clear rules, protect national interests, maintain fair competition and ensure energy security.

A Balanced Model May Be the Best Solution
Private-sector participation in fuel imports should neither be viewed as automatically beneficial nor inherently risky.

If properly implemented, it could improve import efficiency, diversify supply sources, encourage infrastructure investment and increase competition.

But weak regulation could replace a public-sector monopoly with private syndicates, creating risks of hoarding, price manipulation and supply disruptions.

For Bangladesh, the most practical approach may therefore be a balanced mixed system.

Under such a model, BPC would remain the principal guardian of national fuel security and strategic reserves, while qualified private companies would participate in imports and marketing under transparent and competitive rules.

Fuel is ultimately more than a commercial commodity. It is one of the fundamental drivers of the national economy.

Therefore, while opening the door to private-sector participation, Bangladesh must simultaneously strengthen regulation, monitoring, transparency and accountability.

The central question remains: Will private-sector participation create genuine competition in Bangladesh’s fuel market—or will it simply replace a state monopoly with a new private syndicate?