BPC in trouble with imported marine fuel

Import tariff drives up marine fuel price

• 15,000 tonnes fuel remains unused since September 2020
• Per tonne of marine fuel costs $480 in Bangladesh, the price is $450 in international market 
• 35.47% tax levied at the import level causes the price hike 
• The six-month contract worth Tk222cr ends next month 
• BPC yet to receive 60,000 tonne of the fuel under the 75,000-tonne contract
• BPC has requested the NBR to waive the tax 

The Bangladesh Petroleum Corporation (BPC) on 14 September last year imported 15,000 tonnes of environment-friendly low-sulphur marine fuel as the first consignment under a contract to import 75,000 tonnes of the fuel.

But the corporation could not sell the fuel in the last five months, as oceangoing vessels have abstained from buying it from the BPC due to its high price caused by a 35.47% tax levied at the import level.

As per the contract's obligation, the state-run lone fuel importer in the country is supposed to import the fuel within six months and the deadline is going to end next month.

Therefore, the BPC has to pay the money to the other party in the contract without consuming the fuel. 

Meanwhile, oceangoing ships plying on the country's water territory are anchoring at Sri-Lanka and Singapore ports for purchasing the fuel at a cheaper rate.

Currently, the price of per tonnes of marine fuel is around $450 international market, but it is around $480 in Bangladesh.

Professor Dr Shamsul Alam, energy advisor to the Consumers Association of Bangladesh, told The Business Standard that the company should have obtained a tax waiver before signing the contract.

"This is an example of incapability of the BPC. The government should take the money back from those officers for whom this has happened," he said.

When contacted, BPC Chairman Md Abu Bakr Siddique told TBS that they have already sent an application to the National Board of Revenue requesting it to waive the tax on marine fuel import.

"After sending the report, we also had a meeting with the NBR. However, no update has yet come from the revenue board," he said.

Six years ago, the International Maritime Organisation's (IMO) directed its member states to start using low-sulphur fuel, and the directive came into effect in January 2020. 

The IMO, in its 2019 guidelines, recommended banning ships from carrying fuel with more than 0.5 % sulphur to reduce marine pollution. Before the new guidelines, ships all over the world, including 35 in Bangladesh, used furnace oil with 3.5% sulphur content.

Some 95% of shipping companies worldwide have switched over to low-sulphur fuel to comply with the environmentally-friendly recommendation.

Following the IMO's instruction, the BPC started to import low-sulphur marine fuel from September 14 last year.

The state oil corporation also inked a contract to import 75,000 tonnes of such fuel at a cost of Tk222 crore.

After receiving the first consignment, the BPC also set the distribution margin for the three state-owned fuel marketing companies and bunker suppliers.

Oil marketing companies were supposed to receive Tk0.55 against the sale of each litre of marine fuel to foreign/local ships plying on the water territory of Bangladesh, while the bunker suppliers will receive Tk0.50 per litre for carrying the fuel to oceangoing ships.