BPDB seeks cut-rate for furnace oil supplies

State-run Bangladesh Power Development Board (BPDB) has sought supply of furnace oil at cheaper rate from the Bangladesh Petroleum Corporation (BPC) to help bring down electricity generation cost from the furnace-oil fired power plants, said officials.
"We've recently sent a letter to the BPC asking for cheaper rate in view of falling oil prices in the international market," a senior BPDB official told the FE Sunday.
He said the state-run BPC is yet to make any response over lowering of furnace oil price.
"BPDB has been paying furnace oil price to privately-owned power plant sponsors at around half the cost of BPC, which is helping to reduce electricity generation costs," said the BPDB official who requested anonymity.
He regretted the BPDB is paying around Tk 30 per litre to privately-owned power plant sponsors, while it is paying Tk 60 per litre to get it from the BPC.
When contacted, a senior BPC official said any cut in fuel price is a policy decision, where the BPC cannot do anything.
He said if the government had reduced the furnace oil price, his agency would have sold it at lower rate to the BPDB.
The private sector was purchasing furnace oil at lower rate cashing in on the drastic fall in oil price in the international market, industry insiders said.
The price of Brent crude, the benchmark in oil price, in the international market slumped recently to over a five-year low to below $50- a-barrel due to supply glut of oil, they added.
Officials said the BPC and BPDB are already in a row over the pricing of furnace oil and its import.
They said the government's decision to "indiscriminately" allow the private sector to import furnace oil has triggered a mismatch in fuel supply chain, resulting in its oversupply and payment of demurrage to oil-carrying cargoes by BPC.
The BPC alleged that it was struggling with imported furnace oil as its main consumer-BPDB - was not taking committed quantity of the fuel.
In consequence, he said the BPC's furnace oil import exceeded its storage capacity of around 100,000 tonne, forcing the firm to halt unloading of the fuel from new cargoes.
The BPC was also counting demurrage to the cargo owners due to the over stay with the furnace oil in its jetty, said its officials.
When contacted, a former Power Cell director general BD Rahmatullah said, many oil-fired power plant sponsors are crazy about going for import of furnace oil independently taking the benefit of hefty profits.
The private sector is getting 9.0 per cent service charge from the government against import of furnace oil, which is seen as the main reason behind its interest in furnace-oil import venture, he said.
The National Board of Revenue (NBR) is also being deprived of getting a substantial amount of money as import duty, value added tax (VAT) and customs duties as the privately-owned power plant sponsors are exempted from paying such duties, said Mr Rahmatullah.
Before allowing the private sector in oil businesses, the BPC used to import and supply required quantity of fuel to almost all private and publicly-owned power plants through its subsidiary firms for electricity generation.
The government has so far allowed a couple of dozen new sponsors to import furnace oil.
Furnace oil import has been rising significantly as the country reduces its dependency on natural gas for power generation by setting up dozens of furnace oil-fired power plants.
It began importing furnace oil from mid-2010, when establishment of furnace oil-fired power plants gained pace.
Prior to that, Bangladesh was a regular furnace oil exporter.
The country currently has 39 oil-fired power plants, of which 28 with an overall generation capacity of 2,133 megawatts (MW) run on furnace oil.
mazizur.rahman@outlook.com