The government has taken a loan support worth $1.0 billion (100 crore) from the ITFC (International Islamic Trade Finance Corporation) in favour of the Bangladesh Petroleum Corporation (BPC) for the current calendar year to import different fuel oils.
The state agency, a statutory organisation of the government importing, storing, marketing and distributing petroleum products in the country, will start using the fund from August next, sources have said.
The Standing Committee on Non-Concessional Loan through the Ministry of Power, Energy and Mineral Resources (MoPEMR) approved the loan in favour of the state agency in May last, they also said. The BPC sought the approval for using the loan to keep its fuel import and supply uninterrupted in the country, they added.
About US $3.5 billion (350 crore) will be needed to import fuel products in the country for the current calendar year. About US $1.0 billion out of the amount required is available in the form of loan from the ITFC, sources said.
The credit amount and the rate of interest were fixed at the meeting with the ITFC in Jeddah, Saudi Arabia (KSA) on February 02-03 last. The tenure of the loan is six months and the rate of interest is 4.20 per cent annually, according to the Economic Relations Division of the finance ministry.
In 2013, the BPC borrowed $2.2 billion from the ITFC to meet import costs of petroleum products. The amount in 2012 was $2.6 billion.
When contacted, BPC chairman (secretary in-charge) M A Badrudduja said: "The Standing Committee on Non-Concessional Loan gave approval for the $1.0 billion ITFC credit. We will use the loan from August next to import necessary petroleum products."
The profit of the BPC was gradually increasing for not adjusting the fuel prices in the country with their prices in the international market, sources concerned said.
The government had long been paying a large amount of subsidy every year because of the mismatch between the fuel oils' procurement prices and the rates at which those were being marketed in the country. However, the corporation which was earlier cash-starved was now making profit.
In August last, the standing committee on non-concessional Loan of the government approved the deferred payment deal involving $300 million from PETCO-Malaysia, $250 million from Petro-China, $200 million from PNOC-Philippines and $150 million from UNIPEC-Singapore for 150 days with a 3.78 per cent annual interest rate for the fiscal year (FY) 2014-15, according to the BPC data.
"We are now making profit against sale of different fuel oils. If the price remains at this level, we will definitely make a significant profit at the end of the FY," an official of the BPC told the FE.
He said the BPC adopted the deferred payment mechanism to import petroleum products due to a significant amount of bills remaining outstanding with some organisations.
The BPC made a profit of Tk 34.55 billion in the FY '15 following a loss of Tk 23.21 billion recorded in the previous FY, according to statistics of the Bangladesh Economic Review.
The entity borrows from various agencies and banks for this purpose including ITFC, the lending arm of Islamic Development Bank, and from international banks like HSBC, Standard Chartered and Citibank.
The BPC has fixed a target to import 5.81 million tonnes of petroleum products this year, up by 7.50 per cent from that of the previous calendar year.
The BPC has finalised contracts to import around 3.60 million tonnes of refined petroleum products from different international suppliers.
The BPC has deals with the Kuwait Petroleum Corporation (KPC), Petco, the trading arm of Malaysia's Petronas, the Emirates National Oil Company (ENOC), the Philippines National Oil Company (PNOC), the PetroChina, the Unipec Singapore Ltd, Vietnam's Petrolimex, Indonesia's PT Bumi Siak Pusako and Brunei's PB Trading to import refined petroleum products until December 2015.
An official of the BPC said that more or less 1.2 million tonnes of crude petroleum would be imported by using a portion of the credit and the rest would be used to import different refined petroleum products.
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