Strings tie state guarantee for BPC borrowing

The government has agreed to provide state counter-guarantee tied with tough strings for Bangladesh Petroleum Corporation (BPC) to borrow US$50 million from ITFC to import fuel oils, officials said.
Under one of the four conditions binding the surety, the state-run corporation has to mandatorily pay Tk 30 billion immediately to the exchequer against its outstanding debt of Tk 274 billion to the government.
This happens to be first time that the ministry of finance (MoF) tagged such a condition to underwriting credits to BPC, as the corporation has been making hefty profit following oil price slump on the global market in 2014.
The other conditions are: updating the MoF within the first week of each month the net amount of suppliers' credits or other loans, informing it about the outstanding BPC debts against state guarantee or taken from local banks, and sending information to the ministry about liquidity balance.
When contacted Friday over phone, BPC director (finance) Shankar Prasad Dev told the FE that the government knows the financial state of the BPC and thus such order is relax-able.
"It's not obligatory," he said.
Mr Dev said the BPC should pay the money to the public exchequer if possible.
"The government has asked us to carry out many development works, including the second unit of the Eastern Refinery Ltd. We have to save money for that also," he said.
Officials said the state guarantee is required to borrow from the International Islamic Trade Finance Corporation (ITFC), the lending arm of the Islamic Development Bank (IDB).
Each year the BPC imports some 1.3 million tonnes of crude fuel oils from Abu Dhabi National Oil Company (ADNOC) and Saudi Arabian Oil Company, known as Saudi Aramco.  It also imports around 3.7 million tonnes of refined oil every year to meet domestic demand.
The BPC owes to government Tk 274 billion it took as loans to foot import bills during the last 15 years. Instead of paying back the money, the corporation recently again requested the government to turn the debt into subsidy.
The government oil importer had incurred loss since inception but saw some profit during the fiscal year (FY) 1982-83 to 1998-99, bar FY 1996-97. Thereafter, the BPC again started counting losses for having to sell oils at low prices despite price hike on the international market.
Till FY 2013-14, the corporation's total loss had stood at Tk 514 billion. The government on various occasions provided Tk 15 billion in cash and Tk 159.58 billion in the form of bond to take the responsibility for BPC debts. The rest of the amount worth Tk 274 billion still remained BPC loans owed to government.
The crude oil price made a dive in FY 2014-15 and slumped below $50 per barrel in March 2015. The price fell as low as $29 per barrel in January 2016. The BPC, by selling oil at much higher price than the import costs, started making hefty profit again in FY 2014-15. The BPC, from its profit meantime, has paid back Tk 30.858 billion to Sonali, Janata, Agrani, and Rupali banks, Tk 17 billion to Petrobangla, Tk 6.0 billion to revenue board, and Tk 2.35 billion as land price for Unit-2 of the Eastern Refinery Ltd (ERL).
It paid only Tk 10 billion as dividend to government but did not pay the money it took as credits.
In a recent memo to the MoF, the BPC said it was saving money for funding the setting up of ERL-2, Dhaka-Chittagong pipeline, single-point mooring project, pipeline from Numaligarh Refinery of India to Parbatipur in Bangladesh, and new oil refinery at Payra port.
Since the oil price does not remain static on the international market, the petroleum corporation also plans to create a Tk 50 billion fund for import of fuel oils for sixty days to ensure energy security of the country, it said.
syful-islam@outlook.com