Payment complexity clouds Saudi urea import ahead of Boro season

The import of urea fertiliser from Saudi Arabia is facing precarious payment issues due to credit limits of the kingdom's two banks, raising concerns over sufficient supply of the basic plant nutrient ahead of the next Boro season, the state-owned chemical corporation has said.

"We are experiencing difficulties in import payments," the Bangladesh Chemical Industries Corporation wrote in letters to the finance ministry and top officials of state-owned banks last week, seeking urgent steps to ensure uninterrupted supply of fertiliser during the plantation of major crop Boro from December.

Infographic: TBS

Bangladesh imports around 12 lakh tonnes of urea annually from Saudi Arabia, Qatar and the United Arab Emirates under government-to-government deals. Saudi Arabia alone accounts for about 6 lakh tonnes of urea supply.

For the import, Bangladeshi state-owned banks coordinate Letters of Credit (LCs) with Saudi banks through the Relationship Management Application (RMA) – a service provided by international banking payment system SWIFT.

In separate letters to the ministry and banks last week, BCIC Chairman Imdadul Haque mainly pointed out payment disruptions to fertiliser imports from Saudi Arabia – who alone exports around 6 lakh tonnes of urea to Bangladesh every year.

He drew attention to running out of credits fixed by Saudi banks to the Saudi fertiliser supplier SABIC Agri-Nutrients Company.

SABIC Agri-Nutrients Company is a customer of Saudi Arabia's Al Bilad Bank and Bank AlJazira. The two Saudi banks conduct trade transactions with Bangladesh on behalf of the company, and have a combined credit limit.

Sonali Bank said LC payments with the two banks are in trouble as their credit limit for Bangladesh has been reached.

According to the BCIC chairman, some Bangladeshi banks are making partial LC payments owing to the dollar crisis. This blocks the credit line, causing misunderstanding and distrust between the importing and exporting countries.

However, the agriculture ministry claims there will be no fertiliser shortage as the government is determined to maintain food security at any cost.

Futile efforts

The central bank governor, the managing directors of state-owned banks and the BCIC chairman held a meeting on 30 October to settle the payment issues over the urea import.

However, BCIC officials said the situation did not improve much even after the meeting.

Earlier on 25 October, SABIC Agri-Nutrients Company Senior Manager Nawaf Alsabhan and Sales Executive Mohammad Al Abdul Karim held a meeting with state-owned Sonali, Agrani and Janata Bank officials and BCIC chairman in Dhaka.

To resolve the payment issue, the delegates from Saudi Arabia recommended LC opening with Saudi state-owned Saudi Exim Bank.

Subsequently, Sonali Bank contacted Saudi Exim Bank. But the middle eastern bank said it is not connected to the Swift payment system – which means fertiliser import from SABIC is not possible unless there are special top-level arrangements.

Govt still firm about uninterrupted import

On 6 November, Prime Minister Sheikh Hasina instructed the central bank governor, the finance secretary and the top ministry executives to ensure uninterrupted import of essentials including fertilisers.

After the instruction, the commerce secretary and the food secretary told The Business Standard that the PM ordered the governor to clear the import bills for essentials even from the forex reserve if the respective bank fails to manage the greenback on its own.

Even against the backdrop of urea import uncertainties, Agriculture Minister Muhammad Abdur Razzaque told The Business Standard that there would not be any fertiliser shortage.

"The central bank will pay the bill whatever the fertilisers cost," he noted.

Razzaque said the country has "adequate" fertiliser stocks and efforts are on for an "additional stock".

According to the Ministry of Agriculture and the BCIC, urea demand will be around 26 lakh tonnes this year. Besides, the authorities will bring in another six lakh tonnes of urea this year "for emergency stock".

The Aman paddy cultivation will require some 6-7 lakh tonnes of urea, while the demand will be more than double during the Boro season.

Boro plantation will begin next month and the demand for urea will continue to increase from January.

Another blame game? Not now at least

Md Afzal Karim, CEO and Managing Director of Sonali Bank Limited, held the BCIC responsible for over-dependency on a single source.

"The main problem is that BCIC imports fertilisers from only one source. We have requested the BCIC to find alternatives to SABIC. They should think about it," he told The Business Standard.

Refuting partial LC payment allegations raised by the BCIC, Afzal Karim said they are clearing the total payments on time. "There are no payment-related issues at least from our end."

The Business Standard approached the BCIC chairman for comment, but he refused to comment.

Industries Secretary Zakia Sultana told The Business Standard they are optimistic about settling the issues soon, and hoped fertiliser imports would remain uninterrupted.