Bangladesh Sugar and Food Industries Corporation (BSFIC) has sought one-year time extension of the three government guarantees on loans from state-owned Sonali and Agrani banks.
BSFIC Chairman AKM Delwar Hussain recently sent a letter to finance division requesting for the time against the loans. He argued that the state-run mills had to sell sugar at low prices compared to its higher production cost for the sake of local market stability.
According to the chairman’s letter, BSFIC’s total loss reached Tk338.63 crore as the corporation failed to obtain profit from sales in the local market and was unable to repay loan instalments.
The corporation took loan of Tk100 crore from two banks on April 12, 2010 to meet demand of its working capital and the government guarantee of that loan was extended several times.
The finance division gave guarantee till June this year after a previous extension, and now the corporation wants it till the end of June 2016. The corporation made a loss of Tk489.47 crore in four years till 2012.
BSFIC said the state-run sugar mills lowered prices of their product as per the government’s directive. It hopes the price of sugar will increase soon.
“It is not the first time that we have extended the time of government guarantees on the loans,” Delwar Hussain told the Dhaka Tribune. “The extension can help repay the loans easily.”
He said the local price of sugar could slightly rise in next couple of months as the government increased the import duty on crude and refined sugar.
The international price of the product is now quite low, hovering around $240-260 per tonne while a year ago the price was $700 per tonne, Delwar said.
“The per kg sugar price is likely to increase to Tk40 in local market from Tk32 now after the import duty is raised.”
Finance division officials said the production cost of the sugar at the state-owned sugar mills is now Tk80 a kg, which is being sold at Tk32 in the local market, and in this situation it would be difficult to decide extension of loan guarantee.
“Private sugar mills are selling the product at Tk5-7 profit in local market as they have imported crude sugar from Brazil,” said a finance division official.
According to finance division data, the government guarantee against state-owned organisations has been raised by 9,189% in last seven years.
The government guarantee was only Tk720 crore in FY2008-09 but in FY2014-15 it amounted to Tk66,882 crore. The International Monetary Fund expressed fear that the government would have to take the responsibility if the state-owned corporation failed to repay loan, which is a big risk for the government.
As per the IMF’s Extended Credit Facility loan programme condition, the local guarantee should be reduced to zero by the end of June this year.
The world sugar prices fell to $0.29 a kilogram in the April-June quarter of 2015 from $0.40 a year earlier, according to the World Bank Commodities Price Data.
“As a result of the slump, sugar can be bought from the global market at close or just above Tk30,000 each tonne, which is much below the BSFIC’s production cost,” the chairman said.
