Lubricant plants urge allowing raw material import as before
Saturday, 26 June 2010
Fazlur Rahman
Private lubricant blenders have urged the government to bring changes to the import policy allowing them to continue import of raw materials for lubricant oil, which has been barred since April this year.
"Due to the restriction, raw materials worth billions of taka are currently stuck up at jetties," said Mohammad Ullah, president of Bangladesh Lub Blenders Association.
Local blenders said the country's first energy policy, framed in 1996, allowed the private investors to set up lubricant plants in the country.
The policy also said the investors would be free to procure raw materials from local or foreign sources.
The government allowed raw material imports to encourage the locally based lubricant plants to supply their finished products at comparatively lower prices than that of imported ones.
But the latest import policy for the period of 2009-2012, forbids import of raw materials for lubricant oil. It, however, allows the private investors to import finished lubricant products, baffling the local blenders.
"We have been importing raw materials for producing lubricant oils for local markets for more than a decade, but we have been overlooked in the import policy. This should not have happened," Mohammad Ullah told the FE.
Local blenders said they have so far offered lubricant oil at a competitive price and kept the country's supply chain stable. There has been a healthy competition between state-run and private enterprises.
"This (the import policy) will destroy local plants and discourage the private sector. This has been done as part of a plot to benefit foreign companies," said the top official of a blending company.
Mohammad Ullah, also the managing director of Pacific Oil Company Limited, said in absence of local producers the importers of finished products would be able to charge whatever higher prices they want.
"The customs department has not been allowing the private blenders to import raw materials to be used in producing lubricant oil since April this year. Now substandard lubricant oil will flood the market," he said.
"Raw materials worth Tk 200 million imported by my company are currently stranded at the jetty," he said adding the raw materials waiting for customs clearance could total Tk 500 million.
Local blenders urged the government to immediately issue a statutory regulatory order (SRO) to allow imports of raw materials, otherwise the local blenders will be out of business soon.
The prices of lubricant oil will go up in the local market if this continues, which will only benefit the traders. Substandard products will also be smuggled into the country, they said.
They added local blenders have the capacity to meet the total domestic demand for lubricant. There is no need to allow import of finished products.
Bangladesh annually consumes 80,000 metric tonnes of lubricant, according to Bangladesh Petroleum Corporation (BPC). The whole volume costs over Tk 12 billion.
Six companies - Pacific Oil Company Ltd, Fuchs Lubricants Bangladesh Ltd, Oriental Oil Company, Messers Abdul Kuddus, Lube House Industry Ltd and Mobil-Jamuna - are currently importing raw materials to produce lubricant oil for local market and have a capacity to produce 90,000 tonnes a year.
The state-run BPC has the capacity to produce 20,000 tonnes per year.
A commerce ministry official told the FE that the ministry might soon issue a SRO to allow the local blenders to import raw materials.
In Bangladesh, lubricant oil is widely used in irrigation pump as well as for automobiles, industries and inland water transports.
Private lubricant blenders have urged the government to bring changes to the import policy allowing them to continue import of raw materials for lubricant oil, which has been barred since April this year.
"Due to the restriction, raw materials worth billions of taka are currently stuck up at jetties," said Mohammad Ullah, president of Bangladesh Lub Blenders Association.
Local blenders said the country's first energy policy, framed in 1996, allowed the private investors to set up lubricant plants in the country.
The policy also said the investors would be free to procure raw materials from local or foreign sources.
The government allowed raw material imports to encourage the locally based lubricant plants to supply their finished products at comparatively lower prices than that of imported ones.
But the latest import policy for the period of 2009-2012, forbids import of raw materials for lubricant oil. It, however, allows the private investors to import finished lubricant products, baffling the local blenders.
"We have been importing raw materials for producing lubricant oils for local markets for more than a decade, but we have been overlooked in the import policy. This should not have happened," Mohammad Ullah told the FE.
Local blenders said they have so far offered lubricant oil at a competitive price and kept the country's supply chain stable. There has been a healthy competition between state-run and private enterprises.
"This (the import policy) will destroy local plants and discourage the private sector. This has been done as part of a plot to benefit foreign companies," said the top official of a blending company.
Mohammad Ullah, also the managing director of Pacific Oil Company Limited, said in absence of local producers the importers of finished products would be able to charge whatever higher prices they want.
"The customs department has not been allowing the private blenders to import raw materials to be used in producing lubricant oil since April this year. Now substandard lubricant oil will flood the market," he said.
"Raw materials worth Tk 200 million imported by my company are currently stranded at the jetty," he said adding the raw materials waiting for customs clearance could total Tk 500 million.
Local blenders urged the government to immediately issue a statutory regulatory order (SRO) to allow imports of raw materials, otherwise the local blenders will be out of business soon.
The prices of lubricant oil will go up in the local market if this continues, which will only benefit the traders. Substandard products will also be smuggled into the country, they said.
They added local blenders have the capacity to meet the total domestic demand for lubricant. There is no need to allow import of finished products.
Bangladesh annually consumes 80,000 metric tonnes of lubricant, according to Bangladesh Petroleum Corporation (BPC). The whole volume costs over Tk 12 billion.
Six companies - Pacific Oil Company Ltd, Fuchs Lubricants Bangladesh Ltd, Oriental Oil Company, Messers Abdul Kuddus, Lube House Industry Ltd and Mobil-Jamuna - are currently importing raw materials to produce lubricant oil for local market and have a capacity to produce 90,000 tonnes a year.
The state-run BPC has the capacity to produce 20,000 tonnes per year.
A commerce ministry official told the FE that the ministry might soon issue a SRO to allow the local blenders to import raw materials.
In Bangladesh, lubricant oil is widely used in irrigation pump as well as for automobiles, industries and inland water transports.