BPC to take $1.0b ITFC loan for fuel import

Bangladesh Petroleum Corporation (BPC) moves to borrow $1.0 billion from the International Islamic Trade Finance Corporation (ITFC) to import fuel oils, officials said, although it makes profit now by cashing in on global price slump.
And the government is going to give a letter of guarantee in favour of the BPC against the credit support from the lending arm of the Islamic Development Bank (IDB).    
The letter of guarantee may be issued sometime in the current or next week. The state agency, a statutory organisation of the government for importing, storing, marketing and distributing petroleum products, will probably start using the funds from August, they said.
The Ministry of Power, Energy and Mineral Resources (MoPEMR) sent a letter to the ministry of finance (MoF) for issuing the letter of guarantee last week.
"We are working on the letter of guarantee against the ITFC. It may be issued sometime in the current or next week because we have just received a letter from the MoPEMR in this connection," said a senior official who is in the know.   
The standing committee on non-concessional loan through the MoPEMR endorsed last May the BPC bid for loan, the sources also said.
Earlier, the state agency had sought the approval for using the loan to keep its fuel import and supply uninterrupted.
A total of about US $3.5 billion will be needed to import fuels for the country in the current calendar year. About US $1.0 billion out of the amount required is available in the form of loan from the ITFC.
The credit amount and the rate of interest were fixed at a meeting with the ITFC in Jeddah of Saudi Arabia (KSA) on February 02-03 last.
The tenure of the loan is six months and the rate of interest 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 petroleum-import costs. The amount in 2012 was $2.6 billion.  
"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 due to a significant amount of bills remaining outstanding with some organisations.
The corporation made a profit of Tk 34.55 billion in FY15 whereas it counted a loss of Tk 23.21 billion in the previous fiscal, according to statistics of the Bangladesh Economic Review.
Experts in the sector do not favour taking ITFC credits. They pointed out that, presently, the BPC is making profit on sales of its different petroleum products. The amount of its profit will stand at over Tk 70 billion at the end of the calendar year.
On the other hand, the volume of ITFC loan is slightly more than the amount of profit. So, necessary petroleum products could be imported with the profit money, they added.
The entity borrows from various agencies and banks for this purpose, including ITFC, the lending arm of the 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.
Presently, different state-owned enterprises (SoEs) owe a large sum to the petroleum corporation and the agency also is indebted to state-owned commercial banks, sources concerned said.
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