Home ›› 04 Jun 2022 ›› Front
The state-run Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) is cash-strapped, with some of its officials blaming the import of high-cost liquefied natural gas (LNG) in the last four years for the crisis.
Three Petrobangla general managers told The Business Post rising LNG prices in the global market were costing the organisation an additional $80 million per month and it was struggling to bear this expense.
Not only that, but the government was also asking Petrobangla to find alternative sources of funds, they added.
Petrobangla officials said the organisation had enjoyed surplus funds even six years ago, but now it cannot even pay VAT to the National Board of Revenue (NBR) due to the crisis.
They said the ongoing dollar crisis in Bangladesh had worsened the situation, with the Bangladesh Bank now unable to give Petrobangla as much dollar to import LNG as it used to.
Petrobangla Chairman Nazmul Ahsan told The Business Post it was right that Petrobangla was currently facing a severe financial crisis.
“But we will tackle it at any cost. We will have surplus again,” he said.
Dollar crisis
Petrobangla data shows Bangladesh imports 592mmcfd LNG daily from Oman and Qatar under a long-term agreement while another 100mmcfd is bought from the spot market.
The Energy and Mineral Resources Division says it planned to buy 13 tankers full of LNG from the spot market between March and June this year. But Petrobangla has been forced to lower the target to at least one tanker of LNG per month due to a lack of funds.
The cabinet recently approved the proposal to buy at least one tanker of LNG per month. The estimated cost of each shipment was Tk 991.06 crore, but Petrobangla’s accounts department says the amount has increased to more than Tk 1,300 crore due to global price hikes.
Petrobangla General Manager (accounts) Nazrul Islam told The Business Post the Bangladesh Bank usually supplied 95 per cent of the dollar that Petrobangla needed to import LNG, which had now come down to 50-55 per cent.
“It costs more to buy the rest of the dollar from banks. The central bank recently had a meeting with us and said they would not be able to give as much dollar as before until the situation becomes normal,” he said.
He also said the central bank had asked them to buy dollar from banks, creating additional pressure.
Tk 7,000cr VAT unpaid
Petrobangla’s 2016 annual report said the organisation had Tk 25,000 crore in its funds, which began to shrink in 2018 when LNG imports started.
At present, Petrobangla is unable to pay the NBR Tk 7,000 crore in VAT imposed on LNG imports and sales, says its financial management department.
The total VAT since 2018 stood at Tk 17,000 crore, and Petrobangla managed to pay Tk 10,000 crore by 2020. It has been unable to pay for the last two years. It recently sought assistance from the Finance Division but did not get any.
Nazrul said the NBR chairman was giving Petrobangla payment exemptions upon special consideration because “we are not getting any money to import LNG.”
Maqbool E Elahi Chowdhury, a member (gas) of the Bangladesh Energy Regulatory Commission (BERC), told The Business Post it was illegal to impose tax twice on LNG as Petrobangla was not a profitable organisation.
“We have repeatedly asked Petrobangla to find a solution, but they have failed to discuss with the NBR. Petrobangla’s situation is deteriorating gradually due to a lack of competence of its staff.”
NBR Chairman Abu Hena Md Rahmatul Muneem and the commissioner of the Large Taxpayers Unit could not be reached for comments.
GDF, ESF drying up
The BERC formed the Gas Development Fund (GDF) in 2009 and the Energy Security Fund (ESF) in 2016. The GDF was formed to explore and extract gas while the ESF was supposed to be used to tackle emergencies.
Money in the GDF comes from consumers’ gas bills (Tk 0.48 per cubic metre). The ESF money also comes from consumers.
The BERC says Tk 13,000 crore has been deposited in the GDF since the beginning, and Tk 10,000 crore in the ESF.
Petrobangla sought LNG import subsidies from the Finance Division in March this year but did not get any. The Finance Division instead permitted Petrobangla to borrow Tk 3,000 crore from the GDF. On the other hand, Petrobangla has already emptied the ESF to buy LNG.
A Petrobangla general manager told The Business Post the organisation had emptied all its funds for importing LNG. “There may even be problems in our salary disbursements in the future.”
Petrobangla officials said the organisation’s earnings come from that of its 13 affiliates. Of them, a few, including Maddhapara Granite Mining Company, are incurring losses. The money that Petrobangla earns from selling gas is not enough to run its operations.
LNG is already expensive, and when it is mixed with locally produced gas, prices rise to Tk 20.36 per unit. But the average selling price is Tk 9.37 per unit while the government provides Tk 2.89 in subsidies. Petrobangla thus faces losses even after receiving subsidies.
Its accounts department says the annual expenditure on LNG imports is more than Tk 32,000 crore while the government gives Tk 4,000 crore in subsidies.
