NCBs start negotiations on financing import of fuel oils

FE Team | Published: September 09, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Siddique Islam
Three nationalised commercial banks (NCBs) -- Sonali, Janata and Agrani -- have started negotiations with the state-owned Bangladesh Petroleum Corporation (BPC) on financing import of fuel oils.
The Bangladesh Bank (BB) is offering US$300 million to the three NCBs to finance the import of petroleum products by the BPC.
The Ministry of Power, Energy and Mineral Resources has asked the BPC to finalise the negotiations with the NCBs as early as possible to meet their growing demand for fund.
"We have asked the BPC to finalise negotiations with the NCBs within a week," Energy Secretary ANM Nasiruddin told the FE Saturday, adding that the BPC needs money to open letters of credit (LCs) for importing fuel oils.
The central bank has initially agreed to provide such credit facility to the NCBs for financing the import of fuel oils by the BPC, official sources said.
"We will take final decision about sanction of loan after scrutinising the applications of the NCBs," a BB senior official told the FE Saturday.
Explaining the central bank's position, another BB senior official told the FE: "It will be a test case for the NCBs and its continuation will depend on their records of repayment."
"The credit with lower rate of interest will help the BPC reduce their overall liabilities," the BB official observed.
The NCBs have already sent terms and conditions to the BPC relating to the release of such credit.
"We have sent terms and conditions sheet to the BPC in this connection," Managing Director and Chief Executive Officer of the Agrani Bank Syed Abu Naser Bukhtear Ahmed told the FE.
The Ministry of Power, Energy and Mineral Resources earlier requested the central bank for taking measures to provide such credit facility for importing fuel oils.
In the first two months of the current fiscal, the BPC incurred a loss worth Tk 3.77 billion. Of the amount, Tk 1.60 billion was in June and Tk 2.17 billion in July.
Energy division sources feared that if such trend of loss continued, the cumulative loss would stand at nearly Tk 13.0 billion by the end of this fiscal.
The BPC has been importing fuel with loans from Islamic Development Bank (IDB) and the Standard Chartered Bank (SCB) for sometime.
Last year, the BPC took loans worth more than $250 million from the SCB at high rate of interest.
The state-owned enterprise owes foreign banks nearly Tk 45 billion against fuel oil imports. The BPC has been facing huge losses due to mismatch between selling and purchasing prices of the fuel. It has been selling fuel at a price lower than its import cost.
The BPC that was once a profitable entity incurred losses worth Tk 24.45 billion last year. It imports nearly 3.8 million tonnes of fuel from different oil-rich countries.