Bangladesh Chemical Industries Corporation (BCIC) fears the government's fertiliser-import subsidy burden will get heavier as the state-run banks are compelled to clear bills at higher dollar rates, sources say.
It has requested the industries ministry to take steps in this regard.
The state-owned banks are supposed to pay urea import bills as per the Bangladesh Bank's bill collection (BC) rate. While opening letters of credit, they are supposed to buy per dollar at Tk 120, which is the BC rate.
However, the banks currently buy dollars at more than the BC rate and pay fertiliser import bills with that due to the Bangladesh Bank's reduced supply of greenbacks, says BCIC.
On September 26 last year, the central bank issued a circular, narrowing the supply of US dollars to banks in the face of depleting foreign exchange reserves.
Urea import costs would rise if banks buy dollars in the forward or market rate, which would then increase the government's subsidy expenditures significantly, said a senior BCIC official.
He claimed the state-run banks pay urea import bills and shipping charges at the market or forward rate due to the central bank's lower supply of dollars.
BCIC says fertiliser imports would be disrupted if bills are not paid as per the schedules. Besides, food security would be at risk if fertiliser supply is hampered.
The government's target is to import about 1.52 million tonnes of urea in the current fiscal year. Of that, some 0.98 million tonnes will be imported via government-to-government arrangements and the rest will come through Karnaphuli Fertiliser Company.
A BCIC director said the Bangladesh Bank is unable to supply dollars as per the corporation's demand.
"That is why the state-run banks are paying fertiliser suppliers with dollars purchased at more than the BC rate, thus increasing import costs. This will cause the government's subsidy burden to be heavier," he told The Financial Express.
The BCIC is responsible for meeting the annual demand for urea, as determined by the agriculture ministry, through imports and procurement.
Import bills are paid through post import finance loans against counter-guarantees provided by the government.
The government has issued counter-guarantees of Tk 175 billion in favour of four state-run banks - Sonali, Janata, Agrani, and Bangladesh Krishi - to pay fertiliser import bills.
The Advisory Council Committee on Government Purchase recently approved the procurement of 0.1 million tonnes of urea, triple super phosphate, and di-ammonium phosphate.
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