Petrobangla’s ‘no’ to Tk 10b loan

The state-owned Petrobangla has declined to receive a loan of Tk 10 billion (1,000 crore) the government sanctioned for settling a part of its outstanding dues with the revenue authority.
Instead, the Bangladesh Minerals, Oil and Gas Corporation (BMOGC), also called Petrobangla, sought Tk 45 billion in subsidy to meet the price gap on account of selling gas at lower rates, officials said.
Earlier a committee was formed to hammer out a solution to the issue of outstanding VAT (value-added tax) and SD (supplementary duty) the Petrobangla owes to the National Board of Revenue (NBR).
According to the committee, the government can take a decision on financing the price gap that arose in the absence of gas price adjustment with the actual procurement rates, officials said.
Besides, the corporation could take necessary steps to pay all its arrears to the government exchequer, the committee suggested.
"The procurement and local market prices of gas are set by the government and Bangladesh Energy Regulatory Commission (BERC). There is no other hand in setting the gas price. So, the Petrobangla will not bear the liability of the price gap," said a high official of the BMOGC, preferring not to be named.
It has been being Tk 77 billion in indirect subsidy annually due to the mismatch between the procurement and consumer prices, he added.
The gases are procured from international oil companies (IOCs) on the basis of production sharing contracts (PSCs) with them. The natural resources are sold to the consumers at less prices than the IOCs', he also said.
On the other hand, if the gas price is raised once again, about 55 per cent will have to be paid in VAT and SD by the BMOGC. In that case the increased liability will offset the profit margin. Besides, most of the time, the profit margin is less than the increased liability. There is no scope to earn profit by selling the IOCs' gas, he added.
In this situation, the existing price gap would remain and the corporation would never be able to repay it, he said.
The government earlier decided to give the conditional loan of Tk 10 billion to Petrobangla to help it pay part of its VAT and SD arrears, officials said.
The loan was supposed to be given to pay SD-VAT arrears to the central tax authority for the February-October period of this calendar year, they said.
The tenure of the loan is 15 years with a three-year grace period and the rate of interest is 4.0 per cent, according to finance ministry data. Repayment of the loan will start three years after its withdrawal.
Under the lending conditions, the borrowed money can be utilised only for paying dues to the NBR. There is no option for expending it for other purposes. A loan agreement will have to be signed between the finance division and the Petrobangla. Besides, the audited financial statement and the amount of price-gap are also required to be placed before the Finance Division as per the procedural requirements.
By official count, the state corporation owes about Tk 223.58 billion to the NBR on account of VAT and SD arrears for the period between the fiscal year 2009-10 and January 2015.
Talking to The Financial Express, a high official at the NBR said, "During the last one year, the tax authority has tried all possible ways to realise the arrears from Petrobangla.'
The state-owned gas companies collected value-added tax (VAT) and supplementary duty (SD) worth Tk 132.78 billion from their clients between the fiscal year 2009-10 and January 2015 but did not deposit the money with the public exchequer, according to NBR data.
About Tk 90.80 billion got added up as accumulated interest on the VAT and SD for nonpayment in right time as per Section 37(3) of the VAT Law 1991.
From 2009 to 2015, the state-run gas-distributing companies under the Petrobangla had collected taxes/duty from customers but had not paid it to the national exchequer, a source said.
The gross revenue of Petrobangla in the FY 2014-15 from sales of gas, gas-derived liquids, coal and granite stood at Tk 280.759 billion. After paying SD and VAT, the net income was Tk 253 billion, according to its annual report.
Gross expenses, comprising Tk 27.61 billion in SD and VAT along with Tk 219 billion in cost of sales, amounted to Tk 246 billion.
After paying income tax, the net profit stood at Tk 32.71 billion. And on payment of dividend of Tk 8.91 million, the net profit stood at Tk 31.82 billion, the report mentioned.
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