Fresh move to form private sector fuel supply company

The government has moved afresh to establish a private-sector-controlled fuel supply company (FSC) for import and supply of furnace oil to the country's oil-fired power plants, flouting the already established supply chain of the BPC and the private sector, industry insiders said.
The state-run Bangladesh Petroleum Corporation (BPC), which currently has the authority to import fuel and supply it to power plants, has been elbowed out of having stakes in the proposed FSC.
A dozen of privately-owned oil-fired power plants, which were allowed to import fuel of their own to run their power plants, will also be barred from importing it to establish the 'supreme authority' of the FSC, they added.
The future furnace oil-fired power plants will have to purchase fuel from the FSC under new terms.
All furnace-oil fired power plants under the ownership of state-run Bangladesh Power Development Board (BPDB) will have to buy furnace oil from the FSC once it is established, said officials.
It will also be mandatory for the independent power producers (IPPs) and rental power plants to purchase fuel from the FSC.
The FSC will get some 9.0 per cent commission as 'service charge' from the government and might get a waiver on import tax for importing fuel from the international market, they added.
The BPDB submitted a proposal last week to the Power Division under the ministry of power, energy and mineral resources (MPEMR) to approve the FSC, a senior BPDB official told the FE Tuesday.
Before submitting the proposal, the BPDB board passed new terms for formation of the FSC giving majority of stakes -- 51 per cent -- to a private firm, which is also involved in electricity generation, he said.
The BPDB itself would be the owner of remaining 49 per cent stake of the proposed FSC under the new ownership structure, leaving the BPC's stake to 'zero'.
The government initially had planned to establish the FSC in 2012 when the BPC lacked capacity to supply fuel to oil-fired power plants, and had invited pre-qualification bidding in February 2012.
In the first call, two interested private sponsors had submitted bids and both of them became non-responsive.
The BPDB later re-tendered in March 2013 and found a private firm responsive.
After about two years of evaluation, the BPDB moved afresh to issue a request of proposal to the responsive firm changing the structure of ownership of the proposed FSC, it has been alleged.
When contacted, Energy and Mineral Resources Division (EMRD) Secretary Md Abubakar Siddique said, "The formation of FSC will threaten the country's energy security, especially of oil sector."
Mr Siddique, who is an ex-BPC chairman said, "I never supported it in the past nor would support in the future."
"It would be a disaster for the BPC if the government hands over fuel import and supply authority to a private sector-led FSC," BPC Chairman AM Badrudduja said.
He said over the years, the BPC invested billions of taka to increase its capacity to import around 6.0 million tonnes of petroleum products including 1.2 million tonnes of furnace oil by investing billions and constructing new oil storage tankers.
Besides, the BPC has the sole authority under the Bangladesh Petroleum Act 1974 to import and supply petroleum products, he said.
He alleged that the BPC was even not contacted before abolishing its stake from the planned FSC.
"I am not aware of it. But definitely we want full authority, not 10 per cent stake only," said the BPC Chairman.
The Bangladesh Independent Power Producers' Association (BIPPA) and the Bangladesh Energy Companies Association (BECA) have also opposed the government move of establishing the FSC with supreme authority given to a private sector consortium to import furnace oil and supply it to power plants.
They submitted letters to State Minister of the MPEMR Nasrul Hamid Sunday separately to stop the move to form the FSC.
When contacted, Professor M Tamim of the Bangladesh University of Engineering and Technology (BUET) said, "I don't see any justification for establishing the FSC under the existing situation."
"What is wrong with the BPC over fuel imports? Did it fail to import or supply fuel to power plants?" he asked.
The government should empower the BPC to increase further its capacity to import petroleum products, Mr Tamim, who was a special assistant in the previous caretaker government, suggested.
"The private firm will make hefty profit out of it at the cost of public money if the FSC is formed", he said.
The government will make a big mistake by empowering a single firm to import fuel and supply it to power plants, he warned.  
When contacted, United Group managing director Moinuddin Hasan Rashid said, "The involvement of the private sector will ensure optimum use of resources to efficiently import furnace oil at a required quantity and quality in a timely manner, in which the BPC failed."
Through its operational efficiency, the FSC will be able to prevent issues like pilferage, adulteration, late delivery, etc. being faced by the BPC and ensure stable supply of power, said Mr Rashid.
Currently, the country imports around 2.0 million tonnes of furnace oil, of which 1.2 million tonne is being imported by the BPC and the remaining 800,000 tonne by different private sector entities to feed 28 operational furnace oil-fired power plants having the total generation capacity of 2,133 megawatts (MW).
    mazizur.rahman@outlook.com