Bangladesh Petroleum Corporation (BPC) is in a deep crisis of US dollar required for fuel oil imports.

To tackle the situation, BPC is borrowing $1,400 million from the Islamic Trade Finance Corporation (ITFC) for the FY23 i.e. $550 million more than the current fiscal year.
Nagad

Even then, BPC officials say, the dollar deficit for fuel oil imports cannot be avoided.

A higher official of BPC told The Business Post they were not getting enough dollars. Refined oil import is being hampered now.

ITFC grants loan only for crude oil imports. If the fund is used refining oil it will end in 3-4 months. “We have no choice. Local banks do not want to open LCs (letter of credit) due to dollar shortage.”

A BPC Finance Division official says it has to open 16 to 17 LCs for the transaction of around $560-696 million each month to import refined and crude oil. Per barrel refined fuel costs $177 now in international market.

It is counting a loss of TK 99 crore daily due to price hikes globally. State Minister for Power, Energy and Mineral Resources Nasrul Hamid has recently hinted at a rise in fuel oil prices to meet its fund crisis.

However, the BPC Finance Division official says it still has enough fund for next three months. Even then, if the world market is volatile, then the government subsidies will be needed or prices will have to be increased. The company needs Tk45, 000 crore to import fuel oil in the six months from July to December without import duty and VAT.

Manilal Das, General Manager (finance) of BPC, told FP that BPC needed transaction of $100 million against one single LC. But Bangladesh Bank is giving $20-30 million.

Agrani Bank has expressed its inability to open LC again and again. “We are not sure whether we can get more loans to import refined oil from ITFC. However, the decision has not been finalized yet.”

BPC says the company has been borrowing from ITFC, a subsidiary of Jeddah-based Islamic Development Bank (IDB), since 1996 to import only crude oil.

This requires a counter guarantee from the Ministry of Finance and a sovereign guarantee from Bangladesh Bank. In the current financial year, BPC took a loan of $850 million. The interest rate was 2.95.

BPC has already signed to take $1400 million in the current fiscal year to import crude oil.

Bangladesh imports refined and crude oil from Saudi-based Aramco and a state-owned company in the United Arab Emirates. One hundred million tonnes of crude oil can be imported against each LC.

Kazi Mohammad Mozammel Haque, Director (finance) of BPC, told FP, next year’s loan agreement with ITFC has already been inked.“We have to buy crude and refined oil with the loan.”

Banks are unwilling to open LC
BPC sources said in a letter on 17 May to the Finance Ministry and the Energy and Mineral Resource Division, it urged the Bangladesh Bank to make dollar available to state-owned and private banks to open LCs for fuel oil import and issue the necessary directives accordingly.

The BPC used to pay the import bill through the state-owned Sonali, Agrani, and Janata banks and some private banks, including One Bank and Islami Bank.

In November last year, Sonali Bank told BPC that it could no longer open the government LCs due to its financial restraint.

On 12 May 2022 Agrani Bank Limited, a state-owned bank, also informed it that it was almost impossible for it to pay the fuel oil price after buying dollars from the foreign exchange market due to the prevailing dollar crisis.

Mohammad Shams-Ul Islam, the Managing Director (MD) of Agrani Bank, told FP that due to dollar crisis they had some problems in import and export.

“However, we are trying to pay BPC with dollars from remittances on priority basis.”