BPC to take fresh loan from SCB to reduce rely on ITFC

Bangladesh Petroleum Corporation (BPC) is expected to borrow $100 million from the multinational financial institution Standard Chartered Bank(SCB) along with the loan from an International Islamic Trade Finance Corporation to import fuel oil for the calendar year 2020.

BPC has decided to borrow funds from SCB to reduce reliance on ITFC for loan, officials at the Energy and Mineral Resources ministry said.

The state-owned agency has already taken consent of a finance ministry body regarding a $300 million loan from Jeddah based  ITFC loan along with $100 million from SCB through the Ministry of Power, Energy and Mineral Resources, they said.

According to the proposal of the energy ministry, signed by deputy secretary of energy ministry Sheikh Mohammad Balayet  Hossain, the tenure of the loan is six months or 180 days from the date of corresponding disbursement and the rate of interest is 3.16 per cent annually.

Letter of Credit (LC) issuance fee was set at 0.10 per cent. The proposal of BPC signed by Chairman of BPC Md. Shamsur Rahman also reads that the corporation has decided to borrow funds from SCB to reduce dependency on ITFC.

Sources at the Economic Relations Division said Finance Minister AHM Mustafa Kamal has agreed to take $800 million in loans from the ITFC. At present, Bangladesh has an annual demand of 60 lakh tonnes of fuel oil.

Eastern Refinery Ltd, the only oil refinery in the country, produces 15 lakh tonnes of oil a year. BPC imports the remaining 45 lakh tonnes, which costs an extra Tk 6 per litre.

A project that had been undertaken to increase Eastern Refinery's capacity to refine 30 lakh tonnes is at present in a limbo due to a lack of funds availability.

Officials point to the fact that many development projects like this one have come up against impediments as a result of continuous losses and huge loans owed by the Petroleum Corporation. The BPC requires $2-3 billion annually to import petroleum oil.

The state fuel oil import company has to seek loans from foreign banks and lending agencies when it fails to get enough foreign currency loans from Bangladesh Bank.

In past years, it also took loans from SCB, HSBC and Citibank NA. Interest rates are calculated on the basis of LIBOR (London Interbank Offered Rate) and rates fluctuate with changes in global financial markets. In 2008, the BPC borrowed from foreign banks at LIBOR plus 1.84 percent, putting the total rate at 3.43 percent. It was 3.80 percent in 2017. The ITFC will charge 0.70 percent higher this time, which BPC officials attributed to the rise in LIBOR. BPC has a target of importing 65 lakh tonnes this year.

ask/wi