BPC feels the heat

The permission granted to the private rental power plants to import furnace oil duty-free has turned out to be yet another classic case of rash decision taken by the government.
The government, in the face of mounting pressure from the owners of rental power plants, asked the Bangladesh Petroleum Corporation (BPC) to issue 'no-objection' certificate to a section of power plants for duty-free import of furnace oil.
The decision has come as a boon to the furnace oil-run rental power plants but it has triggered a lot of troubles, financial or otherwise, for the state-run BPC.
The private importers of furnace oil in addition to the benefit accrued from the duty-free import of the petroleum product are entitled to 9.0 per cent service charge from the government against their imports.
The financial benefit in the form of service charge has generated great enthusiasm among the rental power plant owners to import furnace oil on their own.
But the BPC is already in the soup. According to a report published in this paper some days back, the Corporation has no place to store the furnace oil it has imported.
The BPC's storage tanks are now filled to capacity. Its principal buyer -- the Bangladesh Power Development Board (BPDB) -- is not lifting the imported furnace oil that it earlier used to sell to the private rental power plants.
The BPDB is committed to lifting 1.2 million tonnes of furnace oil in 2015 to feed its own plants and the plants, owned by the private parties. But it has not taken delivery from the BPC half the volume that it usually takes delivery, the FE report said.
At the moment, the country has 39 oil-run power plants and 28 of them having a total generation capacity of 2133 megawatt (MW) are furnace oil-fired. The government, according to the FE report, has so far allowed 10 of these plants to import furnace oil independently.
The BPC is in trouble with the furnace oil imports that have already reached the port. It has been paying US$15,000 in demurrage to individual foreign oil tankers for every single day of their over-stay period. The Corporation is also thinking of cutting its import schedule involving furnace oil following the unpalatable developments that have emerged of late.
In addition to causing financial losses to the BPC, the decision to allow the private sector to import furnace oil would cause revenue loss to the National Board of Revenue (NBR). The BPC now pays at around Tk. 8.50 per litre in duties and taxes. The rental power plants have been exempted from paying the duties and taxes that the BPC pays to the government. Rather, the private importers are entitled to receive money at the rate of 9.0 per cent as service charge from the government against their individual cost of import of furnace oil!
Moreover, the BPC is being deprived of the profit it used to make through the sale of furnace oil to the rental power plants through the BPDB. The BPDB used to adjust the prices of oil supplied to the rentals with the cost of procurement of power from the latter. The BPC now makes a profit of about Tk.14 a litre of furnace oil at the retail level.
The latest developments prompt one to ask a few questions. They are: (1) how could the government agencies involved in the whole process of allowing the private import of furnace oil overlook the possible consequences? ; (2) did the BPC alert the appropriate authorities about the possible unpalatable consequences? ; (3) was the ministry concerned over-zealous in its attempt to extend any undue benefit to the sponsors of rental plants?  
However, any response to the questions raised above is very unlikely. Lots of questions are asked these days about the performance of various ministries and public sector agencies. Hardly replies are given by the appropriate authorities.
Besides, the ministry of power and energy or for that matter the government is free to skip answers to any question asked about the steps taken for so-called expeditious power generation. The Speedy Supply of Power and Energy (Special Provision) Act, which has already got two extensions, provides indemnity to all who are handling the issues relating to expeditious generation of power.
A couple of months back, the World Bank had recommended phasing out of the rental power plants that have helped stabilisation of the power situation to a great extent. The operation of rental plants has generated enough of controversies because of undue benefits extended to them. The latest duty-free import facility given for the import of furnace oil would only extend greater credence to such controversies.
    [email protected]