Can’t afford any more losses: BPC chairman

The Bangladesh Petroleum Corporation (BPC) on Wednesday said it could not afford to incur any more losses after failing to turn a profit in the last six months, despite posting Tk42,993 crore total profit in the last seven years.

The company, which also has Tk19,882 crore deposited in various accounts from previous profits, alongside having one month of diesel supply, 32 days of Jet-A oil and 18 days of petrol-octane, said it did not have the amount needed for importing fuel oil for the next two months.

In a press briefing, its Chairman ABM Azad said at the current price of oil, after VAT and dealer commission, the cost of diesel is Tk120.16 per litre, which would still result in a loss of Tk6. 

He, however, could not give any information about how much profit they could make on petrol, saying a profit of Tk25 could be made per litre of octane. 

Given the conditions, if the same amount of diesel and octane was sold in the country as was done in July, the BPC's monthly profit at the current rate would still be Tk205 crore.

Currently, the government levies a value-added tax (VAT) of Tk20.70 per litre on diesel and Tk 23.51 on octane, which the BPC has not taken any initiative to reduce.

Azad said the reduction in such taxes were matters for the government and the National Board of Revenue (NBR) to decide. On the other hand, the NBR chief had recently said the tax on fuel oil was a policy decision of the government.

According to the information provided, BPC has paid for the import cost of the country's oil reserves through the money it received from sales and from previous profits.

As of 7 August, the company has Tk 19,882 crore in its various accounts, including fixed deposits, which was derived from the profit of the last seven years. 

Therefore, according to the information provided, even with the record hike in fuel prices, the company will spend almost all of its over Tk19,000 crore on customs duties and fuel oil import in the next two months from the previous profit.

For importing oil for the next two months, the company needs an additional 25% as working capital or around Tk20,000 crore. 

On the sudden price hike, the BPC boss said it was due to the shortage in the working capital.

Earlier, the loss of Tk8,015 crore incurred by the company in the last six months was paid from previous profits without taking any money from the government. 

Even the old losses of BPC before 2014 were adjusted from the profits, he said.

"If the BPC is making profits, its financial position is good. But when the losses start, there is a shortfall in funds. Hence, the BPC always tries to reserve at least two months worth of fuel oil as working capital, so that in case of any abnormal situation, it can plan within two months to keep the supply of fuel oil intact for the following months," he said.

Saying that keeping profits in FDRs was good practice for the BPC as it played a crucial role when oil prices rose in the international market, Azad said due to the FDRs, the company was able to absorb the over Tk8,000 crore loss without taking any money from the government or adjusting fuel prices. 

Stating that the government will reduce the price of oil in line with the international market, the chairman said if the BPC made a profit again, the money would be allocated again to various development projects.

The BPC said the term deposits they had in the banks were being cashed since July last year to meet the cost of oil import. A total of FDRs worth Tk13,265 crore have been encashed so far. It has decided to cash another FDR of Tk4,700 crore to meet the import expenditure of this August. 

Through this, all the FDRs would be encashed.

According to the data of Bangladesh Bank, at the end of 30 March, the amount of deposits BPC held in various banks was Tk31,939 crore, which was informed by the central bank to the Ministry of Finance. 

Besides, the deposits of the company's three subsidiaries - Padma, Jamuna and Meghna oil companies - was almost Tk13,000 crore.

Currently, the BPC has invested Tk10,719 crores in various projects in the energy sector, including the ERL Unit-2.

The BPC said its profit after tax from 2014-15 to 2020-21 was Tk 42,993 crore. From this profit, the company has spent a total of Tk 20,189 crore on various development projects, payment of tax arrears to the NBR, capital investment, dividend and surplus funds given to the government.

Last November, while increasing the price of diesel and kerosene by Tk15 per litre, the Department of Energy and Mineral Resources said the company has made a profit of Tk 47,000 crore in seven years, which is being spent on various development projects of the department. 

If the price of oil did not increase, the implementation of these projects would be hampered. 

However, the BPC chairman said on Wednesday that there was no information about the profit of Tk47,000 crore.

From 1999-2000 to 2013-14 fiscal year, BPC's losses were Tk 53,005 crore, but during that period the government gave a subsidy of Tk44,877 crore, the BPC chairman said. 

The company adjusted the remaining Tk8,128 crore from its profit.

He said they had now adopted a plan to reduce fuel oil consumption by 15-16%. "But the economy is related to fuel. So, keeping the supply constant, we will try to reduce usage by as much as possible."

He also said if the ERL-2 project is implemented, Tk800 crore will be saved annually.

On why the price of petrol and octane had been increased although those were produced in the country, the BPC chairman said the two fuels were derived from crude oil.

"A part of these is provided by private suppliers and the rest by our Eastern Refinery. We also have to import some, where VAT, tax and other charges are payable. Again petrol has to be sold at a lower price than octane. There is a strategic reason for this. Because if there is more gap, then people will sell petrol by calling it octane."

Regarding oil stock, he said till yesterday the diesel stock is about 394,389 metric tonnes (MT), which would last for 30 days. Octane is 22,827 MT, which will last for 18-19 days. There is 19,174 MT of petrol which will last for 18 days and 485,780 MT of jet fuel which will last for 32 days. 

Additionally, there was a stock of 49,600 MT of furnace oil.