Fertilizer imports uncertain due to lack of dollar

BCIC sent letter to Ministry of Industries

Zarif Mahmud: Agrani and Bangladesh Krishi Bank do not want to open LC for fertilizer import of state-owned Bangladesh Chemical Industries Corporation (BCIC) due to dollar crisis. As a result, achieving the target of importing fertilizers in the current financial year is being disrupted. The company has written a letter to the Ministry of Industry expressing its concern. Copies of the letter have been sent to the higher levels of the relevant ministries and departments of the government including the Prime Minister’s Office, Ministry of Finance, Bangladesh Bank. It has been said that if fertilizers are not imported due to LC crisis, food security will be in a disaster.
Sources from the Ministry of Finance and Bangladesh Bank have informed that, due to the dollar crisis, the import has been controlled for about one and a half years, but Bangladesh Bank is assisting the import of fuel and fertilizers on a priority basis. Despite this, the volatility of the currency market cannot be overcome due to the lack of sufficient dollars, which is disrupting the import of fertilizers, one of the components of agricultural production. However, the Central Bank has assured to solve this problem. Before this, BCIC sent several letters asking for sufficient dollar resources.
BCIC chairman Saidur Rahmanrecently sent a letter to the ministry.It is said that in the current financial year 2023-24, a total of 1.45 lakh tonnes of urea fertilizer has been set as a target of importing 9 lakh tonnes and 5.5 lakh tonnes from Kafco Bangladesh under the Government to Government (G2G) agreement. A counter guarantee of Tk 4,000 crore has been issued by the finance ministry in favor of leading banks for uninterrupted import of urea fertiliser. Out of which the cost of fertilizer has been paid by creating a LATR liability of Tk 2,600 crore. Tk 1,994 crores of counter guarantee is still outstanding.
According to BCIC, 2 lakh 10 thousand tons of Urea Fertilizer LC has been established through Bangladesh
Agricultural Bank and 90 thousand tons through Agrani Bank against the target in the current financial year. Against these LCs, the outstanding amount of Kafco Bangladesh is $10.46 million. Out of this, $7.59million of Bangladesh Krishi Bank and $2.87 milllion of Agrani Bank.
It is mentioned in the letter that because the banks are not able to get dollars from Bangladesh Bank as per demand and cannot collect dollars at the fixed price under their own management, even if a maximum of four months have passed since the value date, it is not possible to pay Kafco Bangladesh. As a result, both the banks have been constantly showing reluctance in setting up urea fertilizer LC in favor of Kafco.
BCIC says that recently the proposal to open the LC of Kafco’s ninth lot of fertilizer was sent to Agrani Bank on December 4 but they agreed after 17 days. Similarly, Bangladesh Krishi Bank opens LC 23 days after sending proposal for 10th lot. Banks are delaying the opening of each LC for a long time as they are not getting the dollars as per their demand. A proposal was sent to Agrani Bank on January 3 to open the LC of Kafco’s 113th lot fertilizer, but the bank immediately sent it back to BCIC.
If this situation continues, it will not be possible to set up LC for the remaining target fertilizer import from Kafco in the current financial year 2023-24. This will disrupt the import process of urea fertilizer as well as disrupt the fertilizer supply system. Which will definitely threaten the food security of the country, tarnish the image of the government and create adverse reactions at the farmer level.
Timely payment of imported fertilizer price from Kafco is essential to ensure supply of urea fertilizer as per demand. At the same time, BCIC specifically requested to take measures through Bangladesh Bank to continue setting up uninterrupted LC of urea fertilizer in favor of Kafco through Agrani Bank and Bangladesh Krishi Bank.
According to BCIC officials, the Urea Fertilizer Factory named as Karnaphuli Fertilizer Company Limited or Kafco Bangladesh is a multinational company. According to the agreement at the time of establishment, despite being located in Bangladesh, the fertilizer has to be bought from the factory by opening the LC and paying in dollars.
When asked about this, the Executive Director and Spokesperson of Bangladesh Bank, Majbaul Haque told that although import has been somewhat controlled due to recent reasons, necessary dollars are being given to import fertilizer and fuel on priority basis. In this case, if any problem arises, initiatives will be taken to solve it.