Bangladesh Petroleum Corporation (BPC) moves to borrow US$ 700 million from International Islamic Trade Finance Corporation (ITFC) to import fuel oils for the calendar year 2018, officials said.
The state-owned agency has already sought opinions from the Ministry of Finance about the ITFC loan through the Ministry of Power, Energy and Mineral Resources, they said.
A meeting was held between a high-powered Bangladesh delegation and ITFC at Jeddah in Kingdom of Saudi Arabia (KSA) on October 11-12, 2017.
The amount of loan and the rate of interest were fixed at the meeting. The tenure of the loan is six months from the date of corresponding disbursement and the rate of interest is 3.8 per cent annually. Letter of Credit (LC) issuance fee was set at 0.20 per cent, the officials added.
BPC has asked for the finance ministry's opinions on the loan immediately to keep its fuel import and supply uninterrupted across the country, a senior power ministry official said.
"We have sent a letter to the power ministry, seeking opinions on an ITFC loan of US$ 700 million at a lower rate of interest, but the finance ministry has yet to take any decision in this regard," a senior BPC official told the FE.
Once the ITFC authority releases the loan, the state-owned corporation will import necessary petroleum products, he said, adding that fresh ITFC loan will be used mainly to import crude oil.
The government had long been paying a large amount of subsidy every year because of a mismatch between procurement and domestic marketing of fuel oils.
However, the corporation which was earlier cash-starved is now making profits.
Later, BPC will seek approval for the ITFC credit from the standing committee on non-concessional loan through the power ministry if it gets positive response from the finance ministry, a high official concerned of the BPC said.
"We are now making profits by selling different fuel oils. The entity borrows from various agencies and banks including ITFC, the lending arm of Islamic Development Bank, and from international banks like HSBC, Standard Chartered and Citibank for the purposes," he said.
The BPC has fixed a target to import over 5.0 million tonnes of petroleum products including diesel, jet fuel, furnace oil and octane for next year.
The country needs more or less 7.27 million tonnes of different petroleum products in the calendar year 2018, according to the BPC.