The Finance Division has recently sanctioned Tk600 crore as fuel oil subsidy, although it had earlier decided to not give the approval because the state-run BPC could not get its accounts audited.
International Monetary Fund (IMF), one of Bangladesh’s biggest lenders, have always prescribed the government to cut down subsidy on fuel oil.
As one of the conditions for releasing the 5th tranche of the loan under Extended Credit Facility (ECF) – worth $140m and due in a few months time – the IMF wanted Bangladesh Petroleum Corporation (BPC) to audit its accounts with a global firm within September this year.
Because the BPC had failed to do so that is explain how it spent its two previous subsidy installments of Tk2,031 crore, the Finance Division had earlier decided to cancel the subsidy allocation.
The BPC got Tk581 crore from the Finance Division from April to June this year and Tk1,450 from October 2013 to March this year.
The amount sanctioned last week is released from the budgetary allocation for subsidy for FY2014-15.
Finance Ministry sources said the BPC had originally demanded Tk7,000 crore from the government for the current fiscal year but was eventually awarded Tk2,400 crore.
The IMF also advised the government to not allocate any amount as fuel oil subsidy for the next fiscal year claiming that the price of fuel oil would automatically adjust as per international market price.
Disbursement of Tk600 crore will help the BPC repay some of dues of Janata bank and to reduce tariff gaps because petroleum fuels are sold at rates lower than the import cost, BPC chairman Md Eunusur Rahman said.
He also said: “We have already started the process of finding an international auditor in line with the IMF’s condition. But it is a time-consuming matter.”