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Duty waiver on BPC furnace oil

It'll cut BPDB plants' generation cost


M Azizur Rahman | Tuesday, 13 February 2018


The Bangladesh Petroleum Corporation (BPC) has got 'much-expected' waiver from paying duties against import of furnace oil for electricity generation.
The Bangladesh Power Development Board (BPDB) will purchase the duty-waived furnace oil from BPC to run the public sector's furnace oil-fired power plants, said a senior BPC official.
BPDB's furnace oil purchase cost from BPC might decline by around Tk 9.0 per litre to around Tk 33 per litre from the current price of Tk 42 per litre following the tax and duty waiver. As a result, electricity generation cost of the BPDB plants will also reduce, he opined.
BPC had to pay an aggregated 31 per cent tax, including 15 per cent value added tax (VAT), 4.0 per cent advance trade vat (ATV), 2.0 per cent advance import tax and 10 per cent import duty. Besides, there were freight charges, the company's margin and the dealers' margin, the official added.
The duty waiver came into force following signing of a bilateral agreement between BPC and BPDB recently, BPC director (operations and planning) Syed Mohammad Mozammel Haque told the FE.
BPC informed the customs commissioner concerned of the issue on Monday attaching a letter from BPDB, mentioning that the duty-waived furnace oil will be used for electricity generation, he said.
The duty waiver for BPC will have a retrospective effect from July 2017, Mr Haque said further.
BPC has stopped paying duties and taxes against import of furnace oil from the international market since July 2017, following assurance from the National Board of Revenue (NBR).
NBR then stressed signing the bilateral deal between BPC and BPDB as a pre-condition (of the waiver), he added.
Officials said BPC had long been seeking duty and import tax waiver on import of furnace oil.
An over-heated international oil market, coupled with BPC's weak fiscal condition, had prompted the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources to allow import of furnace oil by the private sector power plants in 2011.
The government has also been providing 9.0 per cent service charge along with import cost to the private oil importers as an incentive.
The entrepreneurs of the country's private sector power plants have been enjoying the duty and tax waiver facility exclusively since January 26, 2011.
A gazette notification issued by the Ministry of Finance on the day stated that the furnace oil, to be used in both the private and public sector power plants for electricity generation, will be free of taxes and import duties.
Before enjoying it, the importers has to certify that the furnace oil to be imported under the duty- and tax-free facility will be used for electricity generation, as per the government notification.
BPC too was supposed to enjoy the similar facility of importing duty-free furnace oil under the gazette notification. But NBR had put restriction on it, alleging that the corporation had huge unpaid dues to the board, BPC officials said.
However, riding on escalated profit against oil trading, BPC cleared all its dues worth Tk 271 billion in 2016, which included outstanding VAT and import duties to NBR, they added.
Bangladesh's overall furnace oil requirement is currently around 2.0 million tonnes per year, of which the private sector imports around 1.5 million tonnes.

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