The issuance of a state bond against Bangladesh Sugar and Food Industries Corporation (BSFIC) dues worth Tk 93 billion is caught in a bureaucratic quagmire, sources say.
Despite a formal request from the Financial Institutions Division (FID) prompted by an 11-member high-powered committee, the Finance Division has yet to make a decision on the matter.
The committee was tasked with addressing issues such as interest waivers, loan repayments and bond issuances for state-owned sugar mills.
Officials from both the Finance Division and the Financial Institutions Division declined to comment when contacted.
Earlier, following instructions by the prime minister, the Bangladesh Bank (BB) governor and the Financial Institutions Division secretary held discussions regarding interest waivers on loans taken by the cash-strapped state-owned sugar mills from state-run banks.
In that context, the Ministry of Industries held a meeting with the Financial Institutions Division, the central bank, the Sugar and Food Industries Corporation and the managing directors of five state-run banks.
The meeting reviewed loan payments of the sugar mills and their financial health. This led to the formation of a committee that decided to halt the gradual increase in interest rates on loans taken by state sugar mills for their operations.
After a series of meetings, the committee recommended the conditional issuance of a state bond to settle all outstanding payments of the sugar mills.
Besides, it proposed setting up a blocked account to transfer outstanding dues to five state-owned banks after interest waivers were applied.
According to sources, the outstanding dues, including interest, owed by the mills to the five state-owned banks (Sonali, Janata, Agrani and Rupali) amount to around Tk 92.91 billion.
This initiative was intended to aid the struggling mills, which have incurred losses for years due to outdated business strategies, chronic raw material shortages and widespread mismanagement.
However, experts were not in favour of the move as they argued that such a measure would only exacerbate the government's financial burden.
According to Investopedia, a government bond is a debt security issued by a government to finance its spending and obligations. These bonds typically pay periodic interest.
Currently, there are 15 state-run sugar mills under the Sugar and Food Industries Corporation, with an annual production capacity of 0.21 million tonnes.
This volume is way too less than the country's annual demand of over 2.0 million tonnes of sugar.
A source said that the loans taken by the sugar mills were intended to support sugarcane farmers. While farmers repaid these funds by supplying sugarcane, the mills failed to do so.
In the fiscal year 2022-23, the Sugar and Food Industries Corporation generated Tk 8.19 billion from all its mills and factories.
However, management expenses exceeded Tk 15.34 billion. For years, these state-owned mills have consistently incurred average annual losses of Tk 10 billion.
The Financial Express made several attempts to reach Senior Secretary of the Ministry of Industries Zakia Sultana and BSFIC Chairman Sheikh Shoebul Alam for comments, but to no avail.
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