Govt under heavy pressure from LNG subsidies

Highlights:
- LNG
subsidy costs surged after global gas prices doubled
- Two
months' subsidies matched entire annual Tk6,500 crore allocation
- Monthly
LNG subsidies increased to around Tk4,200 crore
- Finance
ministry released only part of April subsidy request
- Bangladesh
plans importing 11 LNG cargoes during May
- Delayed
payments could trigger penalties and higher LNG premiums
The finance ministry is struggling to manage
the sharp rise in LNG subsidy costs after international gas prices more than
doubled following the Iran war.
Subsidy demand for just the first two months
after the conflict started equals to the Tk6,500 crore allocated for the whole
fiscal year.
Finance Division officials said monthly
subsidies for LNG imports have risen to between Tk4,100 crore and Tk4,200 crore
since the war began. As invoices for spot market LNG must be paid within 15 to
17 days of delivery, subsidy payments have to be released quickly.
In April, Petrobangla's deficit from LNG
imports stood at Tk4,220 crore. Against this, the ministry sought Tk4,200 crore
in subsidies from the finance ministry. However, the finance ministry released
Tk2,500 crore in April, which Petrobangla used to cover part of the import
costs.
For May, the Energy and Mineral Resources
Division wrote to the finance ministry on 7 May requesting another Tk3,500 crore
in subsidies, citing plans to import 11 LNG cargoes during the month.
According to the letter, signed by Senior
Assistant Secretary Rafiqul Islam, Bangladesh plans to import two cargoes under
long-term contracts, one under a short-term contract, and eight from the spot
market in May. Six cargoes are scheduled for the first half of the month and
five for the second half.
The total cost of importing these 11 cargoes
is estimated at Tk7,730 crore, while Petrobangla expects to earn Tk3,630 crore
from sales. This would leave a deficit of Tk4,100 crore. Only Tk500 crore has
been allocated for May subsidies, creating an additional funding need of
Tk3,600 crore.
The Energy Division warned that failure to pay
invoices on time would trigger late payment charges. It said delayed payments
could also lead to extra premium charges on LNG purchases, increasing the
deficit further.
The division has therefore requested the
urgent release of Tk1,999 crore by 15 May and another Tk1,610 crore by 31 May
in favour of Petrobangla to meet May's LNG subsidy requirements.
N.B: The initial report mentioned the two months' subsidy and the
total allocation for the whole fiscal year to be Tk8,000 crore, but the amount
was found to be Tk6,500 crore upon further verification.
















