The Ministry of Finance (MoF) has sanctioned Tk 1,253 crore in favour of Bangladesh Petroleum Corporation (BPC) in subsidy payments for selling petroleum products in the domestic market at prices lower than its procurement costs. The allocation was made in consideration of the losses and outstanding subsidy for the last five years and for the first quarter to September of the current fiscal year, an office order of the ministry said.
Of the approved allocation, Tk 806.87 crore has been disbursed on the head of outstanding claims of BPC and the rest as quarterly subsidy, elaborated the order.
The MoF, in its official clarification, said though the amount has been sanctioned showing it as energy subsidy, it would be treated as a low-cost loan at 5.0 per cent rate of interest.
An agreement between the MoF and the BPC has to be signed soon to give effect to it, the order said.
The proposal for the loan, having the provision for a 20-year repayment period, was cleared on Wednesday.
’The loan worth Tk 1,253 crore is being provided to the cash-starved BPC to meet its financial losses, involving a substantial amount of money, because of the gross mismatch between its costs of import and domestic sale prices of fuel oils,’ a top MoF official said.
The allocation of fund for the purpose will be met out of the government’s revenue budget, he said.
A senior BPC official said the corporation now incurs loss to the tune of Tk 12 for selling a litre of diesel and furnace oil in the domestic market. According to BPC, it would incur an amount of loss, aggregating around Tk 11,000 crore -Tk 12,000 crore in the current fiscal year, if the prices of diesel and furnace oil are not increased further.
The MoF officials said the government, with a holistic approach, would like to limit new subsidy-related loans from the state-owned commercial banks (SoBs) to BPC to a zero level, while the overall subsidy bill would be lowered further, by introducing an automatic fuel price adjustment mechanism.
BPC made a demand for nearly Tk 1,254 crore from the finance ministry in January as ‘outstanding subsidy’ and operational loss for the first quarter of the current fiscal year.
The government made allocation of Tk 7,950 crore as petroleum subsidy for the current 2013-14 fiscal year and spent Tk 13,558 crore in the same head in 2012-13 fiscal.
Meanwhile, the BPC recently sought Tk 2,000 crore on urgent basis to clear loan payment and fuel import bills for the month of December and January.
Officials concerned at the finance ministry said they were yet to decide on meeting fresh demand of BPC.
-With New Age input
