The Bangladesh Trade and Tariff Commission (BTTC) has recommended an increase in tariffs on the import of bitumen as a safeguard to protect the domestic investor in the industry.
In a recent report to the commerce ministry and the National Board of Revenue (NBR), BTTC proposed that a tariff of 47% be imposed on bitumen imported in drums and a tariff of 37% be imposed on bitumen imported in bulk.
According to a BTTC report collected from the commerce ministry, the Bangladesh Petroleum Corporation (BPC) is the only producer in the import-dependent sector.
It produces 60-70 thousand tonnes of bitumen as a by-product annually, which is negligible compared to domestic demand.
In this situation, Bashundhara Oil and Gas Company Ltd, a subsidiary of Bashundhara Group, started commercial production of bitumen in the market this year.
However, the price of imported bitumen is lower than that of the locally produced one. As a result, the company has appealed to the government to impose higher tariffs on bitumen imports so that the local industry does not suffer.
According to the report, the cost of production of bitumen per tonne – after importing raw materials from abroad and refining locally – is Tk57,289, and the price per 150-kilogramme drum is Tk8,640.
After paying customs duty, the price of bitumen imported in bulk stands at Tk41,739 and per drum stands at Tk5,648.
Bitumen is produced from bituminous crude and there is a total duty of 28% on the import of raw materials.
Additionally, 58.44% of bitumen, 30.33% of diesel, 9.71% of furnace oil, and 1.52% of naphtha are produced from crude.
According to the Petroleum Act 2016, diesel found as a by-product cannot be marketed by private companies and it is to be given to the BPC.
When asked, some bitumen importers said that if the prices of imported goods for Bashundhara are increased, there is a possibility of cheating buyers. With less competition, a monopoly business will be created on the market.
Bangladesh Competition Commission Chairman Md Mofizul Islam told The Business Standard, "If the government raises tariffs on bitumen imports for industrial support, we will see the impact on the market. We will take action if a monopoly starts here."
Demand, production and use of bitumen
The demand for bitumen in Bangladesh is about 5.5 lakh tonnes per year. Its market is growing every year along with infrastructure development work. The demand for the product has been growing at a rate of 10-12%.
Bashundhara Oil and Gas Company has an annual production capacity of four lakh tonnes, which is 70% of the total demand. Work is underway to set up a second unit and its production capacity would be 8.40 lakh tonnes once the plan is commissioned. This is more than the annual demand.
Bitumen is mostly used in Bangladesh for road construction, airport runway construction and footpath construction. In addition, it is used in coating the insides of tanks, coating the bottoms of boats and in the construction of guard walls in heavy industry.
Bitumen is produced in two grades – 80/100 and 60/70.
Import duty on raw materials
There is a total import duty of 28% on raw materials used in bitumen production. In addition, the tariff price has been set at $40 per barrel.
Existing tariff rate on bitumen imports
The customs duty on petroleum bitumen in the drum is fixed at Tk4,500 per tonne. It also has a 2% advance income tax (AIT) and 5% advance tax (AT) on it.
However, those who import in bulk have to pay Tk3,500 per tonne plus 2% AIT and 5% AT.
Further, the report of the commission said that the quality of locally produced bitumen and the quality of imported bitumen collected from the market is tested at the Dhaka University of Engineering and Technology and the Bangladesh Road Research Laboratory.
This has shown that the quality of locally produced bitumen is better than that of imported bitumen.
Between the two grades of bitumen being sold in Bangladesh, the price stands at Tk6,800-7,200 for 80/100 and 60/70 grades in drums and Tk39,300-42,000 per tonne in bulk.
Bitumen's demand grows
Total demand for bitumen is 5.5 lakh tonnes
Bashundhara has 70% production capacity of the demand. If the second plant is commissioned, the production will be around eight lakh tonnes.
BPC produces 60-70 thousand tonnes every year.
The market is growing at a rate of 10-12% every year.
BTTC recommends that a tariff of 47% be imposed on drums and of 36% be imposed on bulk bitumen imports.