Tk 521.73 cr Japanese debt repayments challenge ahead

Palash Urea Fertilizer Project

Staff Correspondent: Bangladesh Chemical Industries Corporation (BCIC) is being facing with the tough challenge of repaying the Japanese loan installments before going into production. The first installment will start on September 13. But the company has no money. Tk 521.73 crore have been requested from the finance department to deal with the situation. Such a situation has arisen in the project titled Ghorashal Palash Urea Fertilizer. However, failure to pay the first installment may have a negative impact on the implementation of the project. These issues were discussed in the Project Steering Committee (PSC) meeting held on August 17.
When asked about this, a responsible official of BCIC told Daily Industry that this is a very sensitive project. So, I can’t say anything about it. Suggesting to speak to the public relations officer, he said, ‘That’s all I said, even my name cannot be coded in it.’
According to sources, BCIC is implementing the project. Under the project, a new factory with a production capacity of Tk 2,800 tons per day and 9 lakh 24 thousand tons of urea per year is being set up in place of the existing Palash urea fertilizer factory in Palash upazila of Narsingdi district. It will be a state-of-the-art, technologically advanced and eco-friendly factory. When the project was approved, its cost was estimated at Tk 10,460 crore. Later, through the first amendment, it was increased by 48 percent to Tk 15,500 crore. At that time the duration of the project was from October 2018 to June 2022. Later the period was extended till December 2023. The project is financed by Japan Bank for International Cooperation, Bank of Tokyo Mitsubishi UFJ Limited and HSBC. Government funds amount to Tk 4,580 crores. As of last July, its cumulative real progress was 80.39 percent and financial progress was 71.61 percent.
According to PSC meeting sources, project director Rajiur Rahman Mallik said in the meeting that the general contractor will complete all the work in the project and start production in the last week of October. Besides, it will hand over to BCIC by December 31. As a result, the first installment of the Japanese yen portion of the repayment will have to be paid on September 13 before the project goes into production. Now this is the main challenge of the project. He also said that for the first installment, 656 crores 41 lakhs 16 thousand 156 Japanese yen equivalent to approximately Tk 521.73 crores is needed. But this money cannot be sourced from BCIC. Payment of this amount should be arranged through the finance department.
In the meeting, the representative of the finance department said that arrangements have been made to pay the repayment amount through the government. Further action will be taken after approval from higher authorities. Since the government has given the sovereign guarantee of the project, the government has to pay the money on time. But the current budget does not include Tk 500 crore for repayment. If the matter is approved, arrangements must be made from another sector. In this case, if BCIC arranges Tk 100 crore from their other fund, the remaining amount could be given from the finance department.
The president of the meeting and industrial secretary Zakia Sultana said in the PSC meeting that since the project could not be implemented on time and went into production, it is not possible to pay the installments of the loan with the money received through the sale of the fertilizer produced by the factory and the money received as a subsidy. BCIC has no money now.
If it is possible to pay the trade gap money from the Ministry of Finance, then it is possible to pay installments from that money. He also said that it is not possible for BCIC to pay the increased gas bill to the Department of Energy and Mineral Resources due to non-availability of trade gap money. For this, the Department of Energy and Mineral Resources will get about Tk 1,100 crore. 4 factories of BCIC were almost closed last year due to gas shortage. As a result, it is not possible for BCIC to pay the installments. Project director Rajiur Rahman Mallick also said that the general contractor will start the ammonia plant from August 20. If it is not possible to supply gas on time as per the demand of the general contractor, the implementation of the project will be delayed. As a result, project costs will increase, fertilizer production will be delayed and loan interest will increase. As a result, the project as well as the government will face financial loss. For this reason, it is necessary to ensure a maximum gas supply of 71.90 mscfd by installing new RMS in the project according to the demand of the general contractor. He also mentioned that under the project, the construction of railway lines and the construction of new residential buildings and non-residential buildings are lagging behind.
He said that the Prime Minister is scheduled to inaugurate this project next October.
At this stage, the Industry Secretary said that since it is not possible for BCIC to pay the required amount of repayment at the moment, the Ministry of Finance will have to take measures to pay the installments. BCIC will send a proposal that if the trade gap money for production and sale of fertilizer is available, it will be possible to pay the increased gas bill with that money. Besides, he ordered to take necessary measures to inaugurate the project next October.
He also ordered the formation of a committee of 5 members to speed up the installation of railway lines and gas supply. Besides, it has been asked to quickly evaluate tenders and appoint contractors for construction of new residential and non-residential buildings.