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Bangladesh is facing complications in importing non-urea fertilisers as the government is yet to pay subsidies for FY23 to private importers, which in turn is preventing them from settling outstanding bills, and bringing in more fertilisers from abroad.
Due to the ongoing financial crunch, traders are having difficulties in opening fresh letters of credit (LC) for continued fertiliser imports, making it impossible for them to pay the foreign suppliers within the deadline.
On June 21, importers wrote to the agriculture and finance ministries informing them of the overall situation and seeking a speedy solution to the dilemma. This will allow the private import process under subsidy.
Importers also point out that if this crisis is not resolved soon, the country's fertilizer import process will be disrupted, insiders told The Business Post.
Fertiliser prices in the international market increased at an alarming rate due to the Russia-Ukraine war, but local market prices were not increased. In the FY22 and FY23, fertilisers were imported through suppliers' credit, add confirmation, discounting, and at sight L/C.
The letter further read that 2 lakh tonnes of MOP fertiliser was imported through the tender process to counter a severe shortage at the end of FY22.
Despite the supply shortage in the international market and LC issues, fertiliser was imported and quickly supplied through suppliers' credit and some LCs to meet the MOP fertiliser demand for Robi crops in Bangladesh.
However, suppliers have yet to pay off bills for the imports due to the non-settlement of bills and USD shortage.
Fertiliser imports have become uncertain as suppliers could not pay on time, as the Bangladesh Bank could not provide USD to private fertiliser importers. There were also complications regarding USD supply and rates in the open market.
In the letter recently sent to the agriculture and finance ministries, importers asked for a few resolutions in the letter, especially the payment of all outstanding bills in a timely manner.
Due to the devaluation of USD in FY22 and FY23, money is being deducted from the banks as well as interest is being charged due to non-receipt of bills even after submission. So importers have asked for the payment of interest for the number of months the bill has been delayed.
Also, in order to ensure payment of USD to the supplying countries, it is necessary for the central bank to ensure greenback payments under LCs. Importers have stated that it will not be possible to participate in any fresh tender process until these issues are resolved.
The commercial banks informed importers that new LCs cannot be opened until payment is made. The importers say the responsibility of fertiliser imports will fall on the government’s shoulders if these issues are not resolved.
The USD crisis and unpaid bills have caused import problems, say suppliers.
Though the government says it will secure enough fertilisers to maintain normal agricultural output, suppliers warn that the country’s fertiliser supply could be affected next year if payment and USD issues are not resolved.
Every year, the country imports fertilisers worth around $5 billion, with urea fertilisers accounting for $1.5 billion and non-urea fertilisers for $3.5 billion. The expenditure varies depending on global prices and currency rates.
To produce enough food grains such as rice, the country depends on foreign fertilisers. It imports 20 lakh tonnes of urea fertiliser every year.
The country also needs 9 lakh tonnes of TSP fertiliser, 19.50 lakh metric tonnes of DAP fertiliser, and 25 thousand metric tonnes of MOP fertiliser.
It should be noted that the government is prioritising agricultural production amid the financial crisis. The Cabinet Committee on Government Purchase had approved buying the highest amount of fertilisers in FY23.
Speaking to The Business Post, Agriculture Secretary Wahida Akter said, “Private importers have demanded that outstanding bills be paid. They did not participate into a recent open tender for fertiliser import.
“The agriculture ministry has notified the finance ministry to pay the dues. We are optimistic that the finance ministry would take the necessary steps to maintain steady imports of fertiliser.”
She added that most of the payments to private importers have already been disbursed.
