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The state-run Petrobangla is upbeat about withdrawal of value-added tax (VAT) on the import of expensive liquefied natural gas (LNG) as it would help reduce overall LNG cost and free this state-entity from any subsidy from the government, said sources.
Top officials of the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) and Petrobangla already held several meetings with the officials of National Board of Revenue (NBR) over the issue, they said.
"We are expecting that the NBR will withdraw 15 per cent VAT on the import of LNG as the value of this imported fuel is not added, rather reduced, as it is blended with local gas," Petrobangla's director for finance AKM Mizanur Rahman told The Financial Express on Wednesday.
When it comes to the current market price and the volume of LNG imports, Petrobangla would be able to reduce the overall LNG import cost by around Tk 65-69 billion annually.
Petrobangla received state-subsidy worth around Tk 60.35 billion during the fiscal year 2023-2024.
Currently, Petrobangla's LNG import cost from spot market is around US$14 per million British thermal unit (MMBTu) and the cost of that from long-term LNG suppliers is around US$10.50 per MMBTu, said Mr Rahman.
Petrobangla has been importing around 98 LNG cargoes - 56 from long term LNG suppliers and 42 from spot market annually.
If the country imports an increased volume of LNG, the overall cost reduction would be higher, said the Petrobangla official.
Petrobangla would be able to increase import of more cargoes with the money saved from the current VAT, which will increase the country's overall natural gas supplies and reduce the gas crisis facing industries, power plants and other gas-guzzling consumers.
According to sources at the Ministry of Finance (MoF), the government paid subsidies worth around Tk 25 billion in FY '19, Tk 35 billion in FY '20, Tk 34.97 billion in FY '21, Tk 60 billion in FY '22, and Tk 63.32 billion in FY '23 as state subsidies on account of LNG imports to Petrobangla.
Currently, LNG import faces double taxation - 15 per cent VAT at the import stage and another 15 per cent at the consumer level without any actual value addition.
It violates the core principle of VAT, it has been alleged.
Besides, the NBR slaps an additional 2.0 per cent advance tax (AT) and a 5.0 per cent source tax, inflating further the overall LNG import costs.
Bangladesh blends imported LNG with local natural gas after its re-gasification.
According to Petrobangla, the cost of blended natural gas during FY '23 was Tk 19.09 per cubic metre (cm) and it soared to Tk 23.85 per cm in FY '24 and Tk 29.39 per cm in FY '25.
The weighted average sales price of gas, however, was Tk 11.91 per cm in FY '23, Tk 22.87 per cm in FY '24 and remained the same at Tk 22.87 per cm in FY '25.
The price gap between the cost of blended natural gas and its weighted average sales price was Tk 7.18 per cm in FY '23. It came down to only Tk 0.98 per cm in FY '24 following several rounds of hike in tariffs including the highest ever rate of 178.88 per cent.
Following the significant hikes, the price gap between the cost of blended natural gas and its weighted average sales price widened again to 6.52 per cm in FY '25, according to Petrobangla.
The overall costs of gas rose to Tk 75.72 per cm in the current FY, Petrobangla has estimated.
Azizjst@yahoo.com