State-owned Bangladesh Petroleum Corporation (BPC) is still borrowing substantial amount of money to import petroleum products from international market although it has been making profit since October 2014 with drastic fall in oil prices in international market, said officials.
"We have continued our borrowing fearing that the falling trend of oil prices in international market may not continue for long," BPC chairman AM Badrudduja told the FE Wednesday.
Justifying the borrowing, he said the prices of oil in international market might jump again at anytime.
The state-run fuel import and marketing firm is currently taking loans from the International Islamic Trade Finance Corporation (ITFC), the lending arm of the Islamic Development Bank Group.
It clears payments within six months of oil imports to four different petroleum suppliers under 'deferred payment' loan mechanism and syndication loan arrangement with some multinational banks like HSBC and Standard Chartered Bank.
Officials said the BPC has moved afresh to borrow US$ 1.0 billion loan from the ITFC for the next one year at an annual interest rate of 4.2 per cent annually as the previous loan period is expiring.
It has deferred payment deals worth $300 million with the Petco-the trading arm of Malaysia's Petronas, $250 million with the Petro China, $200 million with the Philippines National Oil Company (PNOC) and $150 million with Unipec Singapore Ltd.
Interest rate against the deferred payment is 3.78 per cent, which is payable within six months of petroleum imports.
Economists and energy experts, however, suggested that the BPC should be prudent in borrowing under the context of fall in oil prices in the international market.
"The BPC should be cautious in future borrowing seeing the changes in oil prices in international market," World Bank (WB) lead economist Dr Zahid Hussain told the FE.
Financial management of the BPC should be developed to check any sort of fiscal leakages, he added.
Professor M Tamim of the Bangladesh University of Engineering and Technology opined that the BPC should improve its overall fiscal management to cope with the changing global scenario especially in the context of changing oil prices in international market.
Officials said the BPC's profit reached around Tk 20 billion during the first seven months of the current fiscal year (FY) 2014-15 until March 2015 following drastic fall in oil prices.
The BPC never made profit over the past 14 years of its operations since FY 02 although the state-run entity has been providing billions of taka to government exchequer as value added tax (VAT) and taxes against import of petroleum, data from the BPC revealed.
Its loss, however, was recorded at the lowest in FY 03 at Tk 76.10 million when it provided Tk 27.66 billion to the government exchequer as VAT and taxes.
It incurred the highest loss in FY 12 at Tk 105.51 billion and provided Tk 46.91 billion to the government exchequer in the same year, BPC statistics revealed.
Currently, the BPC has been earning profit from all the products it is selling domestically.
If the BPC continues to get profit at the level it attained in December, its profit in FY 15 might stand at around Tk 30 billion, a BPC official expected.
The price of Brent crude, the benchmark in oil price, in international market slumped to over a five-year low to below $50 a barrel in January, 2015 due to over-supply of oil in market, industry insiders said.
Although prices have recovered a bit from the bottom and are now hovering at around $60 per barrel, different international investment banks have predicted that the price would remain at the current price level at least for the current calendar year, they added.
The BPC purchases oil products from the international market and sells them at 'administered rates' in the domestic market.
mazizur.rahman@outlook.com
BPC still taking loans despite fall in oil prices
M Azizur Rahman | Published: May 03, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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