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HEADLINE
 
Oil import on deferred payment
Energy adviser to visit Kuwait to resolve knotty LC problem
Doulot Akter Mala
7/29/2006
 

          The government has decided to take a fresh move to resolve difficulties in importing fuel oil from Kuwait on deferred payment for the next six months.
The energy adviser Mahmudur Rahman is likely to visit Kuwait in the second week of next month to resolve the persisting uncertainty over opening of Letters of Credit (LCs) with the foreign banks. This will be the second visit of the energy adviser to the oil-rich country within a period of two and a half months.
The adviser is expected to negotiate with the Kuwait government to allow the Bangladesh Petroleum Corporation (BPC), the state-owned oil marketing company, to open LCs with the local nationalised commercial banks (NCBs).
Rahman has expressed his optimism about getting the deferred payment facility on import of fuel for the next six months in line with the assurance given by the Kuwaiti emir during his last visit to Bangladesh.
The National Bank of Kuwait (NBK) has refused to take risk for a deferred payment of $ 750 million against oil import bills and sought guarantee from foreign banks.
Discouraged by the prevailing fund crisis of the BPC, no foreign bank has showed interest in opening L/Cs for fuel import.
"I have asked the Bangladesh ambassador to Kuwait to discuss the matter with the newly appointed energy minister of Kuwait and set an appointment for a ministerial meeting to resolve the issue," Rahman said.
The incumbent Bangladesh ambassador to Kuwait Nazrul Islam will be coming back home in the first week of next month being replaced by a new ambassador.
Sources said a BPC delegation during its visit to Kuwait earlier this month requested the Kuwait Petroleum Company (KPC) to allow the BPC to open LCs with the Janata bank or the Agrani Bank for oil import on a six-month deferred payment system.
The KPC in June had agreed to provide oil to the BPC with payment deferred for six months.
Earlier, the government requested Kuwait to extend the deferred payment facilities to help minimise pressure on the economy due to galloping oil prices in the international market.
Currently, the BPC opens LCs for fuel import with the state-run the Agrani Bank and the Janata Bank, which makes payment to the KPC through the NBK within 30 days after receiving the bill.
After the refusal to open BPC L/Cs by the foreign banks, the NCBs are also now refusing to open LCs without cash, sources concerned said.
Sources said the Kuwait government does not consider Bangladesh as a reliable country in financial dealings and has asked Dhaka to provide a guarantor for the fuel worth $750 million it wants to buy on six-month deferred payment.
The KPC has asked the state-owned entity for a guarantor to ensure that the BPC makes payment against the oil import bills within six months.
The KPC had asked the BPC to open L/Cs with one of three international banks - Standard Chartered, Citibank NA or American Express, the source added.
A high official of energy ministry said the government is likely to request Kuwait to allow the BPC to open LCs with any of the two Bangladeshi banks-Agrani or Janata- for import of fuel on deferred payment for six months as no foreign bank is willing to get involved in such a deal.
Currently, Bangladesh has to make cash purchase of petroleum products from Kuwait and was recently in trouble for payment of fuel import bill due to fund shortage.
In order to resolve the foreign currency shortage in near future, the energy division is arranging $ 500 million for fuel import, an energy division official said.
Recently, the Islamic Development Bank (IDB) released $200 million out of its $700 million loan it provides to the BPC annually for oil imports.
The government is likely to get $50 million more from the IDB and borrow $250 million from the Standard Chartered Bank by September next.

 

 
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