The government is going ahead with the plan to establish a private sector-controlled fuel company to import and supply petroleum fuels to oil-fired power plants despite opposition from the state-run companies in the field, said officials.
Once constituted, the company will be importing around 2.20 million tonnes of petroleum products worth around US$ 2.0 billion initially to feed a total of 39 existing oil-fired power plants.
With the commissioning of more oil-fired power plants, the volume of oil import by the firm will increase, so also the turnover, industry-insiders said.
"We are now working to empower the company to look after the overall import of petroleum products and transport fuel to the power plants," State Minister for Power, Energy and Mineral Resources (MPEMR) Nasrul Hamid told the FE Sunday.
He said the company will be established under a public-private partnership (PPP) project.
The government earlier took the initiative to set up the fuel-supply company in 2012 offering the majority stake of 51 per cent to a private firm and the remainder to two state-owned entities under a joint venture (JV).
Bangladesh Power Development Board (BPDB) will have 39 per cent stake while another state-owned entity, Bangladesh Petroleum Corporation (BPC), will hold the remaining 10 per cent stake, as per the partnership plan.
The BPDB, which currently purchases fuel from BPC and supplies to power plants for electricity generation, placed the proposal in 2012 with the MPEMR to establish the firm.
After winning the government nod, the BPDB subsequently floated tender to select the private sponsor, which will have the majority stakes in the proposed company.
Four firms had submitted bids subsequently in June 2013 to become majority stakeholder of the JV firm.
The bidders are Singapore-based Vitol Asia Pte Ltd, United Enterprise & Company Ltd, the consortium of Summit Industrial & Marketing Company Ltd and Summit Oil and Shipping Ltd, and the consortium of Aman Tex and Bulk Petroleum Trade Ltd.
The project remained stagnant since then amid protest from employees of state-run fuel companies -- BPC and its subsidiary fuel-marketing and distribution companies.
Currently BPC imports and supplies fuel to majority of the oil-fired power plants through three of its marketing and distribution companies.
The government separately also allowed some privately owned oil-fired power plants to import petroleum to run their plants.
Employees of BPC and its subsidiary firms fear significant loss of profits once the new firm starts functioning and imports and supplies fuels to all the plants.
If constituted, the fuel-supply company will be responsible to import fuel from the international market and sell to power plants alone, the official added.
"It will cater to just the power sector in order to reduce the increasing burden on the BPC," he further said.
While the company will be allowed to import oils, it will not be allowed to sell them on the domestic market.
The electricity-generation companies owned both by public and private sectors will purchase fuels from the firm to run their oil-guzzling power plants.
The company will get some 9 per cent commission from the government and might get waiver on import tax for importing fuels from the international market.
Currently three of BPC's oil-marketing and-distribution companies -- Meghna Petroleum Ltd, Jamuna Oil Company Ltd and Padma Oil Company -- supply fuel to oil-fired power plants.
Amid fast-depleting natural gas resources, Bangladesh launched a drive to increase oil-based power plants from mid-2010 to commission three dozen new oil-based power plants.
Initially BPC had been facing logistical problems to supply fuel for lack of coordination among the three state-run entities -- BPC, BPDB and Bangladesh Railways -- and inadequate road, railway infrastructure, said sources.
But BPC later strengthened the fuel-supply chain to power plants and currently it was not facing any problem in fuel supply to the power plants, a senior BPC official said.
Under the existing mechanism the BPDB, however, is purchasing petroleum products at higher rates than the international market, while the private sector importing petroleum products at lower rates from the international market.
Besides, the private sector enjoys value-added tax (VAT) and tax waiver by the National Board of Revenue (NBR) and gets 9 per cent interest as service charge against import of petroleum.
BPDB is purchasing furnace oil from the BPC at Tk 60 per litre and supplying it to the power-generation companies to generate electricity.
It also purchases diesel at higher rates.
BPC's import cost on furnace oil is Tk 41.92 per litre after paying VAT of around Tk 8.30 per litre and relevant import duties.
BPDB is purchasing diesel from the BPC at Tk 68 per litre -- about Tk 4-5 higher than the import cost.
Import cost of furnace oil by the private sector currently stands at Tk 30 per litre.
Currently, the country has 11 diesel-fired and 28 furnace oil-fired power plants.
Their electricity generation capacity is 2,987 megawatts (MW) --2,133MWs coming from furnace oil-fired and 854MWs from diesel-fired plants.
azizjst@yahoo.com
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