Bangladesh owes USD 480m to fuel oil suppliers

The Bangladesh Petroleum Corporation (BPC) is struggling to clear its dues for fuel oil. Foreign currency is not available at the banks. With the dues mounting further, many of the supplying companies are denying sending any further consignment. Shipments are getting delayed very often. The pressure for clearing the dues from the foreign suppliers is mounting on the BPC.

BPC sources say the due for fuel oil stands at USD 476.1 million as of 22 August. Bangladesh owes USD 186.5 million to Singapore based company Vitol, the highest among the supplying companies. The Sonali Bank has already delayed one of this company's bills for 110 days. There are also instances where the bills for the foreign supplying companies were delayed by 94 days or 85 days.

Speaking to Prothom Alo on condition of anonymity, two reliable BPC officials say now they will have to pay a 6 per cent excise duty for the delay now. However, none of the companies are putting pressure for the excise duty considering the long term commercial ties they have with Bangladesh. However, BPC is being reminded about clearing the bill on a regular basis. BPC asked for some time explaining the current situations in the country during several meetings held in phases with the supplying companies. It has also been said that the delay was due to the closure of the banks in recent times.

BPC owes Tk USD 58.6 to Chinese company Unipec, USD 57.1 million to Emirates National Oil Company (ENOC), USD 46.9 million to Indonesia’s BSP, USD 21.8 million to Malaysian PTLC and USD 25 million to India’s IOCL.

Apart from these, BPC also has dues to clear with several foreign financial corporations. The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IsDB) Group provides loans assistance to BPC to clear the dues for imported fuel oil. BPC owes more than USD 80 million to them.

BPC has been making profit from selling fuel oil for over the last two years. The government agency has been adjusting the price every month since last March. Therefore, the company doesn’t have any concern regarding incurring any loss at the moment. Despite that, the company is struggling to clear foreign dues over the last two and half years. The banks were also closed for several days during the movement against discrimination and change of regime. It created further problems for the country. Apart from the complications surrounding clearing foreign dues, the company is having problems in opening letter of credits (LCs).

The sources say BPC needs to open 17 to 18 LCs every month to import 500,000 tonnes of refined fuel oil and 100,000 tonnes of unrefined fuel oil. But the banks are always reluctant to open LCs in dollars. It’s taking 25-30 days to clear the debts of a single LC. Although the central bank is releasing USD 20 million from time to time, it’s not enough to clear all dues.

BPC needs 6-6.5 million tonnes of fuel oil every year. The lone fuel oil refinery provides 1.5 million tonnes of fuel oil every year. The rest is directly imported. Diesel covers 75 per cent of the fuel oil used in the country and some 80 per cent of that is directly imported. The oil supplying companies are warning BPC to stop fuel oil supply to Bangladesh.

Speaking to Prothom Alo, BPC director (operation) Anupam Barua said, “We are holding meetings with suppliers on a regular basis. We have succeeded to convince them that delays in the payment were due to the recent unrest. We have told them that we will gradually clear their bills. They won’t stop the supply due to the long commercial ties they have with us.”

However, the country has a satisfactory stock of fuel oil. The country has 426,000 tonnes of fuel oil in the stock as of 22 August which can cover the demand of 35 days. The country has a stock of 23,000 tonnes of petrol which can cover 18 days of demand; 33,228 tonnes of octane which can cover 25 days’ demand and 40,025 tonnes of jet fuel which can cover the demand of 26 days. So there is not much concern in this regard.

However, the country’s stock of furnace oil now stands at 33,452 tonnes, which can cover the demand for 12 days. There are demands for oil at the power plants now. However, most of the suppliers are not willing to provide furnace oil. A cargo ship containing furnace oil is scheduled to reach the Bangladesh coast by 30 August. If it gets delayed somehow, then a crisis is likely to emerge.

Power, energy and mineral resource adviser Muhammad Fouzul Kabir Khan held a meeting with a World Bank delegation last Wednesday. In the meeting, he mentioned about the USD 2.2-billion-due of the energy sector. At the same time, he requested the delegation to provide USD 1 billion as loans to clear the debt. The WB said it would consider if it gets an official proposal in this regard. The energy adviser also sought help from the Asian Development Bank (ADB) to clear the dues of the energy sector.

Speaking to Prothom Alo, M Tamim, former assistant on energy affairs to the chief advisor of the former caretaker government, “The problem has been ongoing for a long time. The problem is not the money, but the dollar crisis. We have come out of this gradually. Otherwise, it will be tough to continue like this. The problem will be solved if the government gets the dollars that they sought from our development partners.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu