BPC incurs loss of Tk 125 cr for Meghnaghat Power plant

Zarif Mahmud
Bangladesh Petroleum Corporation (BPC) controls the import, refining and marketing of petroleum fuels in the country.BPC bought the same diesel at a lower price from the 335 MW Summit Meghnaghat Power Company Limited (SMPCL) after four years at Tk 40 per liter more.
On the other hand, these off-spec diesel blends, which have been lying in the tank for a long time, have given rise to criticism by leaving the market without blending.An investigation revealed these irregularities.
After four years, Bangladesh Petroleum Corporation (BPC) has bought diesel sold at a low price for Tk 40 more per liter.The state institution had to pay more than Tk 125 crore apart from the payable government revenue while buying 3 crore 8 lakh 93 thousand 719 liters of diesel from the 335 MW Summit Meghnaghat Power Company Limited.
This information was found in a review of the report signed by BPC Chairman ABM Azad and a notification issued by Deputy Secretary Energy and Mineral Resources Department Sheikh Mohammad Belayet Hossain on January 18.
BPC buys these oils from the 335 MW Summit Meghnaghat Power Company Limited (SMPCL) through the Power Development Board (PDB).Recently, the issue of paying the price of these diesels came into discussion with various tensions.These diesels sold before September 2019 were received by Padma Oil Company, Meghna Petroleum Limited and Jamuna Oil Company’s Godnail and Fatulla depots from June 25 to August 16, 2023.
According to BPC sources, Summit Meghnaghat Power Company Limited has a 335 MW capacity dual fuel combined cycle power plant with BPC’s fuel (diesel) supply agreement.Since 2016, SMPCL has been buying diesel from Padma, Meghna and Jamuna Oil under the control of BPC.In this plant, the use of diesel stopped when electricity generation started with gas from September 2019.But in the last two years (before September 2019), SMPCL told PDB that 3.10 crore liters of diesel remained unused in the power plant.On December 7, 2022, PDB wrote to BPC requesting to purchase these diesels.
After that, BPC formed a committee on January 2, 2023 by convening BPC General Manager (Marketing) Morshed Hossain Azad to determine the quantity of diesel stocked for the purpose of purchase, verify the quality, determine the reasonable price of diesel and give a report with recommendations on the acceptance of that diesel.The committee reported to the BPC chairman on March 30 of that year.
The report recommended, “Due to the high sulfur content of the diesel stocked at Summit’s plant, the diesel can be purchased at a reduced price of 5 percent compared to BPC’s import cost in the case of purchase from the global market considering that diesel is off-spec.”In this case diesel will be accepted by BPC.
After that, BPC sent a letter to PDB on May 10, 2023, attaching the report of the inquiry committee.The BPC report was subsequently presented at the 1995 meeting of the PDB on 23 May.As usual, the recommendation of BPC was approved in the board meeting of PDB.Then, in the presence of ‘Price Committee’ and Sub-Committee consisting of representatives of PDB, Oil Marketing Companies, Surveyors and Summit, Padma, Meghna and Meghna received 3 crore 8 lakh 93 thousand 719 liters of diesel at 15 degree temperature in 16 consignments from 25th June to 16th August 2023.Yamuna Oil.
PDB sent another letter to BPC on August 20 immediately after receiving these diesel BPCs.Basically, in that letter, according to the notification of the Energy Department on August 29, 2022, to determine the price of fuel oil at the customer level, the depot price has been reduced by 5 percent from Tk 105.43 per liter and by deducting the ship fare, 3 crore 8 lakh 93 thousand 719 liters received at 15 degree temperature.
BPC was requested to deposit Tk 308.58 crore against diesel in the escrow account set up by PDB-Summit.This created a problem as PDB demanded more than the rate recommended by BPC. Two-faced behavior of BPC chairman. The BPC Chairman wrote to the Energy Secretary on September 25, 2023, asking for instructions on determining the price of diesel accepted by PDB, which is asking for a higher price than the BPC recommendation.
The letter mentioned, as per the recommendation of the BPC committee, the average plats price of 3 crore 8 lakh 93 thousand 719 liters of diesel calculated at 15 degrees Celsius, average premium, average exchange rate of dollar, VAT and off-spec, after reducing 5 percent, the price of recoverable diesel will be Tk 170.46crore.
Here PDB’s proposed price is Tk 138.12 crore difference (higher) than the price recommended by BPC committee. Part of the BPC Chairman’s letter to the Secretary, Department of Energy and Mineral Resources mentions that the price structure recommended by the BPC committee for diesel collected from the Summit plant (which in all cases is statutorily implemented by the BPC) was approved in its August 20 letter at the 1995 board meeting of the PDB.The process or pricing structure by which PDB determined the price of collected diesel has created complications for BPC in terms of payment.
After sending the letter to the Energy Department, a meeting was held under the chairmanship of the Minister of State for Electricity, Energy and Mineral Resources Nasrul Hamid MP on November 2, 2023 to take a decision to pay the price of these diesels. In the previous letter written to the Secretary of the Energy Department, the BPC Chairman had mentioned that there was a difference of Tk 138.12 crore.The proposed price of PDB and the price recommended by the BPC committee, but he did not say anything about it in the meeting of the ministry. Rather, he has spoken in favor of Summit and PDB.
It is mentioned in the minutes of the meeting of the ministry that the chairman of BPC told the meeting that BPC supplies the bulk of the country’s needs through imported fuel oil. The purchase price of locally produced diesel is determined through a formula. There is no formula for taking back the goods sold and determining its value. That is why there is a need to decide the price of diesel on the basis of negotiations. Apart from this, the price of fuel oil has been adjusted several times in the country.
As a result, selling price of product at BPC level (ex ERL price), price at marketing company level (ex-depot price) has changed. The recalled diesel from Summit has already been sold. Due to the demand of diesel in the country, BPC would have imported the same amount of diesel from abroad at a high price to meet the demand of the country, if BPC did not take supply of 3,08,93,719 liters of diesel from Summit. Diesel collected from Summit’s plant has played a supporting role in the ongoing war in Russia-Ukraine, the global dollar crisis and global special situations.
A reasonable price may be fixed for pricing/payment of diesel subject to mutual consent of all the expenses incurred at the BPC/marketing company and local level and applicable VAT, source tax, payments are made from the existing sale price of diesel received by BPC so that no one is harmed.
This is how BPC got Tk 125 crores in the purchase of diesel
The price of these diesels was determined in the meeting of the ministry. As per the decision mentioned in the minutes of the meeting, the price of diesel collected from the BPC Summit plant has ranged from the selling price of diesel at the consumer level of Tk 109/litre to the cost incurred per liter (VAT Tk 13.23 + equal transport fare Tk 0.90 + financing charge Tk 1.98, (109.00-16.11) = Tk 92.89 per liter after deducting 7 percent tax at source. BPC will deposit all oil price payments into an escrow account between PDB and the company.
Then on January 18, in a notification issued by Deputy Secretary of Energy and Mineral Resources Department, Sheikh Mohammad Belayet Hossain, the pre-tax price of 3,08,93,719 liters of diesel supplied from Summit Meghnaghat Power Company Limited’s plant to Godnail and Fatulla depots in favor of BPC was Tk 92,890 per kiloliter and the rate is fixed at Tk 1,06,823.50/kl with a post-tax price of Tk 13,933.50/kl as 15 percent of the pre-tax price. The pre-tax price of diesel per liter is fixed at Tk 92.89. Meanwhile, BPC confirmed that after deducting tax at source, the remaining amount has been paid into the escrow account.
On the other hand, when diesel was supplied to Summit from 2017 to 2019, the price of diesel at the consumer level was Tk 65 per litre. BPC has been selling diesel at the consumer level since April 25, 2016. In the notification issued by the Department of Energy and Mineral Resources on April 24, 2016 for fixing and adjusting the price of diesel, the pre-tax price of diesel was fixed at Tk 52.18 per litre. Accordingly, BPC supplies diesel to Summit Meghnaghat Power Company. Accordingly, BPC had to pay 40 71 paise per liter more than the pre-tax selling price of Summit’s returned diesel. BPC has to pay Tk 125.77 crore more than the selling price by taking back 3 crore 8 lakh 93 thousand 719 liters of diesel only as pre-tax price.
On the other hand, according to the notification of the Department of Energy and Mineral Resources on April 24, 2016, diesel was sold at Tk 65 per liter in the market. According to the notification, the ex-depot price was fixed at Tk 62.81 per liter by adding the pre-tax price of diesel to the VAT, merchant level VAT, margin of marketing companies, equal transport fare, BPC development fund sector expenses.
As per latest notification on 29 August 2022, ex-depot price of diesel including all charges and taxes is Tk 105.43. Tk 42 taka per liter is 62 paise more. However, the post-tax price has fallen to Tk 106.8235 as per the notification announced by the Department of Energy and Mineral Resources on January 19 regarding the return of Summit diesel. Since these oils were supplied from the Summit tank to the tanks of the marketing company at Godnail and Fatulla, BPC had to multiply Tk 1.3935 per liter more than the ex-depot price.
Like analysts
Consumers’ organization Consumers Association of Bangladesh (CAB) energy advisor Professor M Shamsul Alam told that the government provides fuel oil for power plants and coordinates with the electricity bill. Such oil must be returned. Private institutions can’t benefit from government money through sales. The whole process of overbuying is illegal.
What BPC saying
BPC Chairman ABM Azad’s official and personal mobile phones were called several times to ask for his statement on the overall issue, including buying at a low price, selling at a high price, but his statement was not available.
When asked about this, BPC Director (Finance) Kazi Muhammad Mozammel Haque told that the ministry has fixed the price of diesel taken from the summit. I was not even in the ministry meeting. However, according to the decision of the Ministry, the price of diesel after deducting tax at source has already been deposited in the escrow account.