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With the ongoing Boro-planting season approaching to its peak, farmers face a looming uncertainty: a potential shortage of urea due to the ongoing dollar crisis, according to Bangladesh Chemical Industries Corporation (BCIC).
The state-run chemical agency has warned of dire consequences if two state-owned banks do not clear around $104 million in dues to Karnaphuli Fertilizer Company Limited (KAFCO) -- the lone multinational joint venture in the domestic fertiliser sector.
KAFCO produces urea fertiliser from natural gas. Its shareholders include the government, BCIC and private entities from Japan, Denmark and the Netherlands.
BCIC says KAFCO's non-payment could hinder the import of 0.25 million tonnes of urea needed for this Boro season.
The breakdown of KAFCO dues is as follows: $75.922 million to the Bangladesh Krishi Bank and $28.748 million to Agrani Bank.
In early January, BCIC wrote to the finance ministry demanding payment for KAFCO -- the major granular urea manufacturer and supplier in Bangladesh.
The Cabinet Division, the Bangladesh Bank, industries secretary, agriculture secretary and relevant public offices have also been informed, according to a copy of the letter obtained by The Financial Express.
Most of the urea used in the country is required during the Boro season.
According to the Bangladesh Agricultural Development Corporation (BADC), around 2.7 million tonnes of urea fertiliser are needed in the current fiscal year alone.
The majority of the demand will be met through imports. Besides, foreign currency is needed to purchase fertiliser from KAFCO.
For the current fiscal year 2023-24, the government has set a target of importing 0.9 million tonnes of urea under government-to-government arrangements and 0.55 million tonnes through KAFCO.
"Due to a lack of readily available dollars from the Bangladesh Bank, as requested by banks, they are unable to secure dollars at the fixed price through their own means. Consequently, even after four months since the value date, they have been unable to make due payments to KAFCO," reads the BCIC letter.
The letter goes on to say that Agrani Bank and Bangladesh Krishi Bank have consistently shown reluctance to establish Letters of Credit (LCs) for urea fertiliser imports from KAFCO.
The BCIC warns that if this continues, it will be impossible to secure LCs for the remaining 0.25 million tonnes of urea fertiliser from KAFCO during the current financial year (2023-24).
"Hampered urea imports would disrupt fertiliser supply, jeopardising food security," the BCIC warns in the letter, noting other potential consequences such as farmer discontent and reputational damage for the government.
According to official documents, Agrani Bank and Bangladesh Krishi Bank delayed establishing LCs for the 9th and 10th fertiliser consignments sent by KAFCO.
On January 3, 2024, KAFCO submitted an LC proposal for the 11th fertiliser consignment to Agrani Bank. The bank declined to open the LC and immediately returned it to the BCIC, where it currently remains pending.
BCIC Commercial Director Kazi Mohammad Saiful Islam said there should be no issues regarding the LCs since the government has already issued bonds to settle debts from outstanding fertiliser subsidies.
Contacted, Bangladesh Krishi Bank Managing Director Md Shawkat Ali Khan said, "We will do our utmost to provide the necessary support regarding the fertiliser LC issue, as this is a crucial matter."