The Energy Division has urgently reached out to the Bangladesh Bank, seeking assistance for the state-owned Bangladesh Petroleum Corporation (BPC) to secure the necessary dollars, saying it is crucial to settle overdue import bills that have accumulated over several months.
An energy ministry document shows, as of 30 September, BPC's overdue payments to international suppliers stood at $670 million – $260 million to the International Islamic Trade Finance Corporation, and $410 million to other suppliers.
But the BPC's overdue payments to international suppliers were only $50 million as of 15 August, meaning that they have shot up to $410, or more than eight times in just one and a half months.
Failure to resolve this issue promptly could potentially lead to increased costs as suppliers may impose penalties for delayed payments.
In response to this pressing situation, key figures from the energy ministry, including the state minister, secretary, and chairmen of the BPC and Petrobangla, convened an emergency meeting on 28 September to address the matter. According to a source within this high-level meeting, the ministry has decided to bring it to the attention of the prime minister.
Earlier in April-May this year, the BPC was struggling to pay import bills due to the dollar crisis, and some suppliers had declined to unload oil at the Chittagong port without clearing the payments. After sailing for several days on the sea, one supplier unloaded the oil after BPC made payments. Since then, BPC has been trying to pay the import bills regularly. But things got acute again in the middle of August for want of the greenback.
When contacted, Energy Division Secretary Md Nurul Alam questioned, "Is there any crisis of fuel oil in the country? Then, why are you talking about it?"
BPC Chairman ABM Azad did not receive phone calls or reply to texts despite several attempts by The Business Standard.
Md Mezbaul Haque, spokesperson for the Bangladesh Bank, said the central bank supplies foreign currency to support priority imports, and this support will continue in the future.
A BPC official, requesting not to be named, said the Corporation has no dearth of taka, but it is not getting adequate dollars from the central bank and the commercial banks.
"Whatever the Bangladesh Bank is giving us, it is insufficient," said the official.
For example, he said the BPC needs an average of $35 million daily to meet the import bill demand, but it got $15 million to a maximum of $25 million a day between 25 and 28 September this year.
Once, the BPC was a most sought-after client for many banks as it is a state-owned organisation and opens large-scale letters of credit (LCs) that help banks earn huge commissions and gain from exchange rate conversion.
Accordingly, in addition to the four state banks, private and foreign banks, such as One Bank, EBL, Islami Bank, Standard Chartered, and HSBC, used to open BPC LCs for the import of oil.
But that is not the case now. For instance, one of the aforementioned local private banks last opened BPC's LC in March 2022. In June, the bank opened another LC worth $5 million just after getting the dollar from the central bank.
Zaid Bakht, chairman of Agrani Bank, said the delay in opening BPC LCs or payment to suppliers is due to the dollar crisis.
"The Bangladesh Bank supplies the necessary dollars for government imports. Considering the current foreign exchange situation, the Bangladesh Bank has reduced the supply of dollars. As a result, some gaps have emerged," he told The Business Standard.
"The Bangladesh Bank is cautious so that there is no panic regarding the foreign currency reserves, keeping the upcoming election in mind."
Currently, there are reserves equivalent to more than four months of imports. He said in some cases, LCs are being deferred due to the reserve situation.
He hoped that after the upcoming national elections, the central bank would increase the supply of dollars and the situation would return to normal.
BPC imports 5 lakh tonnes of refined and 1 lakh tonnes of crude oil per month. For this, 17 to 18 LCs have to be opened. It costs $500 to $600 million. The recent price hike is costing another 25% more per month.
Some cases of overdue payments
The BPC procures fuel oil from a total of 10 companies. Two of them supply crude oil, while the others supply refined fuel oil.
According to a BPC report, as of Monday, the supplier company Vitol has arrears of $116.48 million. This amount accumulated due to the non-payment of the dues of four LCs. These dues were to be paid between 1 and 10 September. LCs were opened in Sonali, Janata, Agrani, and Rupali banks.
And $33.54 million owed to Unipec against an LC opened with Sonali Bank, which was due to be cleared on 11 September last year.
Similarly, a supplier named BSP will get $32.33 million against an LC with Agrani Bank. Which was due for payment on 30 August.
Also, Petrobangla is unable to pay the LNG import bills on time. The company owes nearly $450 million to its suppliers. Petrobangla is also allegedly suffering from a shortage of money. It is expected that if the power sector subsidy amount is released, it will be easier for Petrobangla to pay its arrears.
Fuel oil demand and imports
Around 70% of Bangladesh's fuel oil imports are refined, and the rest are unrefined. Diesel accounts for 70% of the total fuel oil.
BPC plans to buy 32.65 lakh tonnes of refined fuel oil from July to December of the current financial year. It also plans to import six lakh tonnes of crude oil during this period. From July to September, BPC imported about 18 lakh tonnes of fuel oil, both refined and unrefined.