Petromax Refinery moves to market-linked pricing model for its gasoline
The BPC will set the price of octane based on the previous month’s average of the international market benchmark rate
Petromax Refinery Ltd – a subsidiary of Shahjibazar Power Company Ltd (SPCL) which supplies to the Bangladesh Petroleum Corporation (BPC) – has changed its gasoline pricing model from a profit margin model to a market-linked one.
The BPC, on the seventh day of every month, will set the price of octane and petrol it buys from the refinery, Shahjibazar Power informed its shareholders on Wednesday.
Its Company Secretary, Yeasin Ahmed, told The Business Standard, "From a fixed profit margin model, we have entered into a market-linked pricing formula. Our pricing model is now similar to what the liquefied petroleum gas (LPG) industry is following."
The BPC will set the price of octane based on the previous month's average of the international market benchmark rate. It will also take into consideration cost components like import duties, river dues, bank charges, finance costs, and the loss of fuel in operational stages, in accordance with the new formula the government introduced for refineries who produce premium gasoline from imported condensate - a byproduct of gas fields.
Since local petrol of an inferior grade has no international benchmark, the price of petrol per litre will be fixed at Tk4 less than the monthly price set for octane.
"This (the new pricing method) has increased chances for both improvement and deterioration of the refinery's profitability," said Yeasin Ahmed.
Profitability will depend on how low the costs remain and how fairly the prices are set by the BPC, he explained.
Shahjibazar Power runs its power generation business mostly depending on its refinery business for its annual revenue, thus contributing sub-optimally to annual profits. Shahjibazar Power also has an associate company named Midland Power that runs a 50 MW power plant, where it owns minority shares.
Shahjibazar Power entered the stock market in 2014 and its sponsor directors hold 59.21% of company shares.
Its shares closed 5.09% higher at Tk80.5 each in the Dhaka Stock Exchange on Wednesday, compared to the previous session.
Against a face value of Tk10 each, its net asset value per share was Tk38.05 at the end of June 2021, while annual earnings per share stood at Tk6.53.
