furnace oil to public power plants

BPC to get tax-free import facility

To compete with the independent power producers (IPPs), the Bangladesh Petroleum Corporation (BPC) will supply tax-free furnace oil to power plants, aiming to regain the market it has lost over the last few years. As a result, the cost of power generation would also go down significantly, if the fuel price is cut. “As a state-owned corporation, we will be able to supply cheaper furnace oil to power plants, as the National Board of Revenue (NBR) has given us the permission. So, this is the right time to fight the IPPs in the oil business competition. This could bring us good results, as we have a good network across the country,” Mir Ali Reza, the marketing director of the BPC, told The Independent last week.
The country has more than 42 oil-based power plants that consume 1.5 million tonnes of furnace oil. Of that, the BPC supplies only 4 lakh tonnes of furnace oil, as it has to pay taxes and duties to the government. But IPPs enjoy tax- and duty-free oil import facilities, and also receive 9 per cent handling charges from the government. So, in terms of competition, the BPC has been far behind them in making money in this business.
On 26 January 2011, the finance ministry issued a gazette notification, declaring that all kinds of oil that would be used for power plants would be free of taxes and import duties. But in the last few years, the BPC did not get any tax- and duty-free facility, as the NBR restricted it from collecting the maximum possible revenue. Recently, the BPC convinced the authorities that they could make money by importing furnace oil with tax-free facility. “We told the high-ups in the government that if the BPC makes money, ultimately the money goes into the government’s coffers. So, the BPC should get a level playing field to do business,” said a BPC official. In response to a letter, the Bangladesh Power Development Board (BPDB) has expressed interest in buying tax- and duty-free oil for their 22 furnace oil-based plants for the next six months. The volume would be 314,000 tonnes. “Right now, we are selling furnace oil
at Tk. 42 per litre. But if we get the tax-free facility, the price will come down to less than Tk. 5 per litre. So, we hope that in future, the IPPs would not need to import fuel and the country would save billions of dollars. Also, the price of power production would go down,” Mr Reza added.
Nevertheless, the IPPs are not taking it easy, as they will lose a lot of money. The power companies did not sound too interested either.
Imran Karim, vice-president of the Independent Power Producers’ Association (BIPPA), told The Independent, “We cannot accept the BPC’s offer, as we have to discuss more issues. We are always trying to adjust the fuel to our machinery, and the Singapore-based exporter gives us all kinds of facilities. Will the BPC give us these facilities? I think not.”
Golam Rabbani Chowdhury, the managing director of Barkatullah Power Plant, told The Independent, “The BPC has had quality- as well as quantity-related problems for long. In 2011, they could not give us enough fuel for our plants. So, we had to invest a lot of money in creating infrastructure for oil import and storage.” Defending the BPC proposal, an official said the IPPs are making big money by importing the oil, bypassing the BPC. They are getting 9 per cent service charges from the government and are enjoying tax- and duty-free import facilities. Some IPPs might even be involved in money laundering under the guise of the fuel import business, according to some media reports.
BPC officials said they took the issue seriously, as they lost maximum market share in supplying furnace oil to the power plants. “On 22 or 24 April 2017, there will be a consignment of 20,000 tonnes of furnace oil with tax-free facilities for power plants. We have already informed the NBR about this. Not only that, we have also applied for 9 per cent service charges from the government, which the IPPs get,” said a BPC official. “Let us see whether we can make the market competitive, as we have invested a huge amount of money in creating storage facilities for the IPPs,” he added. Government sources said some syndicates control the supply chain of furnace oil in the country, and make huge money. The government has given permission to around 12 IPPs, including Barkatullah and Acorn, to import furnace oil for their power plants. The others include Summit Narayanganj, ECPV Chittagong, Sinha People’s, KPCL Unit 2 and 3, Power Pac, Digital Power, Dutch Bangla, and Orion Power. In the last fiscal year, the IPPs imported 1.2 million tonnes of furnace oil and 750,000 million tonnes in 2014–15.

furnace oil to public power plants

BPC to get tax-free import facility

To compete with the independent power producers (IPPs), the Bangladesh Petroleum Corporation (BPC) will supply tax-free furnace oil to power plants, aiming to regain the market it has lost over the last few years. As a result, the cost of power generation would also go down significantly, if the fuel price is cut. As a state-owned corporation, we will be able to supply cheaper furnace oil to power plants, as the National Board of Revenue (NBR) has given us the permission. So, this is the right time to fight the IPPs in the oil business competition. This could bring us good results, as we have a good network across the country, Mir Ali Reza, the marketing director of the BPC, told The Independent last week. The country has more than 42 oil-based power plants that consume 1.5 million tonnes of furnace oil. Of that, the BPC supplies only 4 lakh tonnes of furnace oil, as it has to pay taxes and duties to the government. But IPPs enjoy tax- and duty-free oil import facilities, and also receive 9 per cent handling charges from the government. So, in terms of competition, the BPC has been far behind them in making money in this business. On 26 January 2011, the finance ministry issued a gazette notification, declaring that all kinds of oil that would be used for power plants would be free of taxes and import duties. But in the last few years, the BPC did not get any tax- and duty-free facility, as the NBR restricted it from collecting the maximum possible revenue. Recently, the BPC convinced the authorities that they could make money by importing furnace oil with tax-free facility. We told the high-ups in the government that if the BPC makes money, ultimately the money goes into the governments coffers. So, the BPC should get a level playing field to do business, said a BPC official. In response to a letter, the Bangladesh Power Development Board (BPDB) has expressed interest in buying tax- and duty-free oil for their 22 furnace oil-based plants for the next six months. The volume would be 314,000 tonnes. Right now, we are selling furnace oil at Tk. 42 per litre. But if we get the tax-free facility, the price will come down to less than Tk. 5 per litre. So, we hope that in future, the IPPs would not need to import fuel and the country would save billions of dollars. Also, the price of power production would go down, Mr Reza added. Nevertheless, the IPPs are not taking it easy, as they will lose a lot of money. The power companies did not sound too interested either. Imran Karim, vice-president of the Independent Power Producers Association (BIPPA), told The Independent, We cannot accept the BPCs offer, as we have to discuss more issues. We are always trying to adjust the fuel to our machinery, and the Singapore-based exporter gives us all kinds of facilities. Will the BPC give us these facilities? I think not. Golam Rabbani Chowdhury, the managing director of Barkatullah Power Plant, told The Independent, The BPC has had quality- as well as quantity-related problems for long. In 2011, they could not give us enough fuel for our plants. So, we had to invest a lot of money in creating infrastructure for oil import and storage. Defending the BPC proposal, an official said the IPPs are making big money by importing the oil, bypassing the BPC. They are getting 9 per cent service charges from the government and are enjoying tax- and duty-free import facilities. Some IPPs might even be involved in money laundering under the guise of the fuel import business, according to some media reports. BPC officials said they took the issue seriously, as they lost maximum market share in supplying furnace oil to the power plants. On 22 or 24 April 2017, there will be a consignment of 20,000 tonnes of furnace oil with tax-free facilities for power plants. We have already informed the NBR about this. Not only that, we have also applied for 9 per cent service charges from the government, which the IPPs get, said a BPC official. Let us see whether we can make the market competitive, as we have invested a huge amount of money in creating storage facilities for the IPPs, he added. Government sources said some syndicates control the supply chain of furnace oil in the country, and make huge money. The government has given permission to around 12 IPPs, including Barkatullah and Acorn, to import furnace oil for their power plants. The others include Summit Narayanganj, ECPV Chittagong, Sinha Peoples, KPCL Unit 2 and 3, Power Pac, Digital Power, Dutch Bangla, and Orion Power. In the last fiscal year, the IPPs imported 1.2 million tonnes of furnace oil and 750,000 million tonnes in 201415.