State-owned Bangladesh Petroleum Corporation (BPC) has bowed down to the pressure of government high-ups and is set to issue no objection certificates (NOCs) to facilitate fuel import by a number of new privately owned oil-fired power plants, industry insiders said.
They said the BPC was going to issue NOCs in favour of several new privately owned oil-fired power plants although it feared it would incur huge financial losses as a consequence.
The Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already sent a list of the new oil-fired power plants to BPC for issuing NOCs and facilitate fuel import independently, said sources.
BPC has also decided in principle to issue NOCs to some oil-fired power plant sponsors in line with the energy ministry's directive, a senior BPC official said.
The state-run fuel import and marketing monopoly, BPC, is scared of having its new fuel storage tanks 'empty' and seeing all of its three oil marketing companies-Meghna Petroleum Ltd., Jamuna Oil Company Ltd. and Padma Oil Company - experiencing slump in business, he said.
Employees at all the three state-run fuel marketing companies have already protested allowing import of fuel by private power plant sponsors.
Currently, BPC imports and supplies the required quantity of fuel to almost all privately owned power plants for electricity generation.
But the country's privately owned oil-fired power plant owners recently demanded they be allowed to import oil on their own, arguing that BPC has been supplying substandard fuel to power plants, which they said has caused mechanical problems to the power plants.
They have claimed that they incur huge revenue losses due to substandard quality of oil being imported by BPC.
BPC officials, however, refuted the allegation and said they have been importing fuel from the international market after ensuring required quality and supplying oil to power plants as per their requirements.
Over two dozen privately owned oil-fired power plant owners have sought permission from the government to import oil on their own for generating electricity, he said.
These privately owned oil-fired power plants, having total electricity generation capacity of around 2,000 megawatts (mw) of electricity are interested to import furnace oil and diesel on their own to run their power plants.
If allowed, the import cost for the petroleum products will be borne by state-owned Bangladesh Power Development Board (BPDB), which buys electricity from the plants.
These privately owned power plant sponsors will have to import over 1.0 million tonnes of furnace oil and around 200,000 tonnes of diesel annually to run their power plants.
BPDB is set to pay for the cost of the fuel and also pay an extra 9.0 per cent as service charge to these plants for importing the petroleum products.
The payment will have to be made within three months of the oil imports.
The service charge to be paid by BPDB for the fuel oil import will be reviewed every year, the official said.
BPDB buys electricity from private plants in Bangladesh and supplies it to the national grid.
Allowing the private sector to import fuel might increase BPDB's electricity purchase costs from these plants as it would have to pay an additional 9.0 per cent charge to them.
Currently, BPDB pays BPC the fuel import costs, but it does not pay any service charge.
Under the existing regulations, the energy ministry requires collecting 'no objection certificate' from BPC to allow private power plants to import petroleum products on their own.
The government launched a drive to increase oil-based power generation in mid-2010 amid fast-depleting natural gas resources, and had commissioned nearly three dozen new oil-based power plants by the end of 2013.
Currently, 35 oil-fired power plants are operational across the country.
Of the total, 23 with a combined generation capacity of 1,787 mw is run on furnace oil, and 12 with a capacity of 393 mw on diesel.
BPC has planned to import around 5.6 million tonnes of crude and refined petroleum products to meet the growing needs including that of power plants in 2014.
It currently incurs loss of around Tk 10 per litre against diesel and kerosene trades.
