Bangladesh Petroleum Corporation (BPC) is set to receive US$ 600 million loan soon from International Islamic Trade Finance Corporation (ITFC) to import fuel oils for the calendar year 2018, officials said.
Earlier, a high-powered delegation of the state-run agency signed a US$ 700 million loan deal with ITFC at a meeting held on October 11-12 last year at Jeddah in Kingdom of Saudi Arabia (KSA).
Besides, the standing committee on non-concessional loan approved the US$ 700 million loan in December 2017.
BPC will take the loan by three instalments -- US$ 200 million, US$ 400 million and US$ 100 million -- to import fuel oil, according to the BPC.
The state-run entity has requested the Energy and Mineral Resources Division (EMRD) to take necessary steps in this regard. The division forwarded two letters to the finance ministry to take required action about ITFC loan, a high official of EMRD said.
"Lending from third banks to open letters of credit (LCs) is time-consuming. As a result, BPC generally takes loan from ITFC to import crude oil," General Manager (Finance) of BPC Moni Lal Das told the FE.
BPC has already sought to issue counter-guarantee against US$ 600 million ITFC loan to finance fuel oil import, he said.
A finance ministry official said the fund would be sourced from ITFC, which requires a guarantee from the central bank and a counter-guarantee from the government.
"We will issue counter-guarantee of US$ 600 million in favour of Bangladesh Bank to facilitate BPC's oil import and operations soon," he told the FE.
"Counter-guarantee issued by the finance ministry will be considered a sovereign guarantee," the official said, explaining that the government itself took responsibility for repaying the amount to the ITFC if the petroleum corporation failed to pay back the borrowed money.
The amount of loan and the rate of interest were fixed at the meeting in KSA. The tenure of the loan is six months from the date of corresponding disbursement and the rate of interest is 3.80 per cent including administrative fee annually.
It's mandatory for the corporation to report to the ministry on its portfolio on supplier's credits or any other short-term foreign loan.
The corporation will have to inform the ministry regularly about its credits if taken from local banks or financial institutions, says an office order of the finance ministry.
BPC has fixed a target to import over 5.0 million tonnes of petroleum products including diesel, jet fuel, furnace oil and octane for the current year.
The country requires more or less 7.27 million tonnes of different petroleum products this calendar year, according to the BPC.
BPC has started incurring loss again in oil trading since November last after making substantial profits for last three consecutive years since late 2014.
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