Clearing KAFCO dues

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FE Team | Published: January 23, 2024 20:12:13

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The Boro season spanning the months between December and March is the peak cropping time of the year when the largest quantity, about 20 million tonnes, of rice is produced in the country. Obviously, the demand for the crop's critical input, urea fertilizer, remains high – projected at 1.3 million tonnes – during this period. But the prevailing foreign exchange crunch is affecting import and the existing severe gas supply crisis is hampering production of fertilizers locally. This calls for setting the government's priorities right so that farmers have an adequate supply of the urea fertilizers during the Boro season. However, certain developments raise questions, if the government departments concerned are earnest to meet the emergency. The Bangladesh Chemical Industries Corporation (BCIC), the state-run agency that manages the fertiliser plants of the country, for instance, according to a report carried by this paper recently, is not certain about smooth supply of urea fertiliser to farmers during the ongoing Boro season. The concern arises from the fact that two state-owned banks, the Bangladesh Krishi Bank and the Agrani Bank, are holding back payment of the dues worth US$104 million to the Karnaphuli Fertilizer Company Limited, KAFCO, the local multinational fertiliser plant of which 51 per cent share is owned by the government. As a consequence, timely supply of fertiliser amounting to 0.25 million tonnes from KAFCO in the middle of the Boro season is hanging in the balance.
It may be recalled at this point that severe gas shortage had forced the government to shut down BCIC-run fertiliser factories of the country since mid-2022, creating uncertainties about the production of about a million tonnes of fertiliser as targeted by it (BCIC) for the current fiscal year. However, the government in November resumed operation of the fertiliser factories keeping in view the demand for fertilisers during the Boro season. But considering acute shortage of gas supply, uninterrupted supply of gas to the fertiliser plants remains a big challenge. This is despite the prime minister's directive to prioritise allocation of required amount of gas for the fertiliser factories so that there are no shortages of fertilisers in the Boro season.
Since KAFCO plays a crucial role in meeting the demand for fertiliser in this season, one wonders, what is the point of dithering over the payment of dues to this important source of fertiliser of the country? Because the required actions from the aforementioned state-owned banks are not forthcoming for reasons best known to them, the deep concern expressed by the BCIC authorities is understandable. It is also not hard to comprehend the predicament of the banks in meeting their L/C (Letter of Credit) obligations when US dollars are in short supply. It is only more so when the precious dollars are not readily available from the central bank. Neither are the banks well-placed to secure the dollars at rates fixed by the central bank on their own. But at the height of the current Boro season such payment-related uncertainties about the country's important source of fertiliser, especially granular urea, are indefensible.
Since at stake here is the unhindered supply of urea fertiliser to farmers in this peak time, the issue of KAFCO dues merits necessary attention from the highest quarters in the government. An inordinate delay in clearing KAFCO dues may prove costly for the nation's food security.