The first-ever overseas road shows held by the Energy and Mineral Resources Division (EMRD) to arrange credit worth $ 250 million for fuel imports drew spontaneous responses from the international lenders.
"Over 20 international banks including those of European Union (EU) and Middle East countries responded positively to provide syndicated loan to the Bangladesh Petroleum Corporation (BPC) for fuel imports against the backdrop of the the overheated international oil market," EMRD secretary AMM Nasiruddin told the FE.
"They were very much keen to be a part of the syndicated loan to the Bangladesh Petroleum Corporation (BPC) to help import gasoline products," the EMRD secretary, who led the Bangladesh team in the road shows, said categorically.
The high-powered team including BPC chairman Sheikh Khurshid Alam presented these road shows in two Middle East countries - Bahrain and Dubai - Monday and Tuesday respectively to woo the international lenders to provide syndicated loans to the BPC to import fuels on credit.
Of the total amount of $ 250 million sought by the EMRD from the international lenders, the Standard Chartered Bank (SCB) of Bangladesh will provide $ 25 million as the lead bank and the remaining portion will be raised from the syndicated partners.
The $ 25 million is the highest permissible amount of SCB's loan for a single party in Bangladesh.
A team of the SCB financial analysts led by Monika Malek spoke at the presentations focusing on the macro-economic situation of Bangladesh including its growth in terms of exports and gross domestic product (GDP), contribution of the manufacturing sector to the GDP etc to convince international lenders to extend the credit.
The local branch of the SCB will mobilise the syndicated loan for the BPC as the lead bank within one month.
EMRD sources said the government of Bangladesh is the guarantor of the syndicated loan in the case of failure of the BPC in repaying the money.
"If raising of the syndicated loan through the road shows becomes successful, the government will not have to worry about funding for fuel imports in future," the EMRD secretary said, commenting on the future impact of these road shows.
Though the road show programme of the EMRD was the first of its kind, the arrangement of the syndicated loan for the BPC will be the second of this type so far.
Under the initiative of the Islamic Development Bank (IDB), the EMRD could arrange a syndicated loan worth $ 150 million in February this year with the participation of several international banks including those of Japan, the EU and the Middle East.
EMRD sources said the poor financial strength of the BPC, coupled with the looming uncertainty over the deferred payment arrangement with Kuwait for importing gasoline products, has pushed the government towards looking for alternative financial arrangements through road shows to meet payments against fuel imports.
They feared, the government would face a problem in footing the fuel import bills after November this year if alternative financial arrangements are not made soon.
Considering the prevailing fund crisis of the BPC, the nationalised commercial banks (NCBs) as well as the foreign banks are not showing any interest in opening letters of credit (LCs) for fuel import, said sources.
The state-owned BPC suffered losses to the tune of Tk 27 billion (2700 crore) last year due to sale of petroleum products at subsidised rates, a senior BPC official said.
He also said the BPC owes around Tk 500 billion to different nationalised commercial banks (NCBs) with the biggest chunk to Sonali Bank as the corporation has failed to repay its loan year after year.
The BPC, a subsidiary of Petrobangla, is now facing a dire liquidity crisis owing to non-payment of arrears amounting to Tk 9.0 billion by large public sector corporations like Bangladesh Power Development Board (PDB), Biman Bangladesh Airlines, Bangladesh Chemical Industries Corporation (BCIC), Bangladesh Railways (BR) and defence services organisations, he added.
According to sources, the PDB, Biman, BR, the defence services bodies and BCIC regularly procure their diesel, jet fuel and petrol from the BPC without clearing dues.
The dues of PDB, Biman, BR, defence services bodies and BCIC stand at Tk 1.55 billion, Tk 4.65 billion, Tk 68.5 million, Tk 516.4 million and Tk 203.4 million respectively, BPC sources said.
The country currently imports 3.80 million tonnes of oil every year from the Kuwait Petroleum Corporation (KPC) and the Indian Oil Corporation (IOC).
Of the imported fuel oil, 2.3 million tonnes are diesel, 550 thousand tonnes are kerosene, 310 thousand tonnes are furnace oil, 270 thousand tonnes are jet fuel and 150 thousand tonnes are octane.
Over 80 per cent of the total petroleum products are imported from the KPC.