The state agency took local loan to repay foreign debt for its new fertiliser plant, counting Tk42 lakh in interest per day
The government corporation that looks after fertiliser production supposedly has everything in place – four previously built huge fertiliser factories, a brand new fifth state-of-the-art plant touted to be the largest urea manufacturing plant in South Asia, enough trained manpower, and the capacity to produce all of the country’s fertiliser needs.
But in the end, it all comes down to a three-letter word – gas. Or the lack of it.
The Tk15,500 crore Ghorashal-Palash Urea Fertiliser Factory was commissioned in November last year in Narsingdi with the aim to reduce dependence on urea imports to ensure that global price volatility and supply disruptions do not imperil the country’s food security.
But the natural gas rationing to fertiliser factories did not let it happen as the scanty supply is only enough to run the new factory, keeping four others idle.
Severe financial strain
The state-owned Bangladesh Chemical Industries Corporation (BCIC) that operates these factories is now reeling under severe financial strain. It is unable to pay gas bill arrears to another state agency Petrobangla and has borrowed money to repay instalments of foreign loans for its new factory.
BCIC officials said its new factory’s 9.24 lakh tonnes annual output would add to the strength of four others with nearly 18 lakh tonnes capacity— enough to meet the country’s demand for the most-used nutrient of plants, mainly used in paddy cultivation.
They said if all the five state-owned urea plants were in operation, the country could save at least Tk10,000 crore in foreign currencies on annual import of urea and remove its supply uncertainties from any global shock like the pandemic or the war.
BCIC is trying to stay afloat as Petrobangla cut its gas supply to fertiliser plants to almost a fourth compared to two years ago.
BCIC Chairman Md Saidur Rahman told The Business Standard that the scanty gas supply will enable them to operate only the Ghorashal-Palash factory and forced them to lower production targets.
New factory redundant?
This means Bangladesh will still continue to rely on urea imports, keeping its enhanced production capacity idle and the new factory built with foreign loans almost redundant.
The BCIC has already borrowed money to repay foreign loan instalments for its Tk15,500 crore new plant, the largest of its kind in Southeast Asia.
BCIC officials said they are now getting only 72 million cubic feet per day (mmcfd) of gas, down from 250 mmcfd it used to get in 2022 for four factories. Now, after the addition of a new factory, Petrobangla has cut its gas supply by 71% due to arrears.
The huge outstanding bills prompted Petrobangla, already struggling to meet the growing demand for gas from various sectors, to restrict its supply to BCIC, putting the latter in trouble to keep its four old factories–Jamuna Fertiliser Company Limited, Shahjalal Fertiliser Factory, Ashuganj Fertiliser and Chemical Company Limited, and Chittagong Urea Fertiliser Limited — running.
“We do not have any plan to supply gas to the remaining factories, except Ghorashal-Palash, next fiscal year. The fertiliser factories owe a significant amount of gas bills,” Petrobangla Chairman Zanendra Nath Sarker told TBS.
Demand 27 lakh tonnes, production 10 lakh
Due to the gas supply crunch, the production target for the fertiliser factories has been set at 10 lakh tonnes of urea for FY25 against the country’s demand for 27 lakh tonnes, said officials at the industries ministry.
If the four urea plants stay out of production, the deficit will have to be met by imports. The BCIC had to import 15.40 lakh tonnes of urea fertiliser in the 2022-23 fiscal year to meet the local demand, according to its financial statements for FY23.
If gas supply can be ensured, imports of urea can be avoided and the country’s dwindling forex reserves be relieved of additional pressure, officials concerned said.
Moreover, they calculated, local factories produce urea cheaper than the imported one. At a cost of Tk65,490 per tonne, the total import cost for the fertiliser amounted to Tk10,085.46 crore. However, if the fertiliser had been produced domestically, the cost would have been Tk6,052.66 crore as per previous gas price.
Gov pays low for high priced product
Even if the cost is calculated at the increased price of gas, the production cost would have still been significantly lower than the import cost, they claimed.
Petrobangla had raised its gas price from Tk4.45 to Tk16 per unit in June 2022. But the BCIC did not pay the additional price, resulting in its gas bill arrears to reach Tk2,500 crore, according to…
Read More: How gas shortage foils BCIC bid to cut urea import bills