State-owned Bangladesh Petroleum Corp has submitted a formal request to the National Board of Revenue seeking a waiver from local taxes, value added taxes and other duties imposed on refined oil product imports, in order to borrow less from its main financier, International Islamic Trade Finance Corp., BPC Chairman Eunusur Rahman said Friday.
The Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources will also submit a similar letter soon to the NBR for the tax waivers for BPC, the official told Platts.
BPC paid around Taka 50.22 billion ($644 million) in local taxes, VAT and other duties to NBR in fiscal 2012-2013 (July-June), which was 7.05% higher than that of fiscal 2011-2012.
The corporation incurred a total loss of around Taka 53.84 billion in fiscal 2012-2013 from the import of oil products.
BPC will reach a breakeven point if the tax authority waives these taxes on the oil product imports, Rahman said.
The country's state-run fuel import and marketing monopoly has already reduced its annual borrowings by 45.5% to $1.2 billion, from November 2013, from the ITFC, the lending arm of the Islamic Development Bank Group, Platts previously reported.
BPC's drop in the loan amount is part of several conditions set by the International Monetary Fund under its Extended Credit Facility agreement with Bangladesh for $987 million, where BPC has to cut its external loans to a maximum of $775 million by June 2014.
Under the existing regulation, the import of oil products is subject to payment of 12% customs duty and 15% VAT at the import stage.
Already burdened with financial losses incurred on importing the oil products, these taxes and other duties are worsening the financial capability of the BPC.
BPC purchases oil products from the international market and sells most of them at lower rates in the domestic market, resulting in significant losses.
Currently, BPC is incurring losses of around Taka 10.23/liter against gasoil imports and Taka 10.17/liter against superior kerosene imports, BPC sources said.
It does not incur losses for gasoline and high sulfur fuel oil imports as domestic prices are higher than international prices.
Two privately owned power plant operators, which have received approval to import HSFO, are enjoying local tax, VAT and duty waivers for their import of the product. These two privately owned power plant operators are importing around 150,000 mt/year of HSFO. BPC TO ALSO SEEK ADDITIONAL FUNDING
Apart from seeking the tax waivers, BPC is also considering to seek additional funding from the government above the $1.02 billion that was allocated to it for fiscal year 2013-2014 (July-June), to partially cover its oil import costs and offset losses from domestic sales, Rahman said.
In addition, BPC is eying syndication loans from some foreign banks and deferred payment mechanisms from its refined product suppliers, to finance its imports, he added.
The company now has syndication loans of around $400 million with banks such as HSBC, Standard Chartered, as well as deferred payment schemes of about $1 billion with suppliers, namely Malaysia's Petco, the trading arm of state-owned Petronas, and Philippine National Oil Co., Rahman said.
For January-December 2014, BPC has so far tied up term imports of around 3.74 million mt of refined oil products, with Kuwait Petroleum Corp., Petco, Philippines' PNOC, Emirates National Oil Co., Egypt's Middle East Oil Refinery; Maldives National Oil Co., PetroChina and Indonesia's Bumi Siak Pusako.
BPC will also import around 1.4 million mt of crude oil from Saudi Aramco and Abu Dhabi National Oil Company, for its 33,000 b/d Eastern Refinery at Chittagong, bringing total oil imports lined up so far for 2014, to 5.14 million mt.
In comparison, BPC imported an estimated 5 million mt in 2013, of which 1.4 million mt comprised crude oil and about 3.6 million mt were oil products.
