Textile factory owners seek duty exemption on furnace oil import

Published in New Age on December 19, 2017

Textile factory owners want to import high-speed furnace oil with exemption of all duties and taxes to run their captive power generation units which they say are suffering from a severe shortage of gas supplies.

Bangladesh Textile Mills Association in a letter last month sought government approval for allowing them to import the fuel oil. In the letter, they have complained that they are not getting adequate gas supplies while the price was raised by more than 222 per cent in the past two years.

The government now supplies less than 2,700 million cubic feet of natural gas per day against an overall demand for more than 3,700 mmcfd.

The association has requested the government to rationalise its policy for captive power generation units at textile factories with duty-free furnace oil imports, a facility rental power suppliers have been enjoying since 2012. The association says that power generation costs Tk 11 per unit or kilowatt-hour using furnace oil supplied by the state-run Bangladesh Petroleum Corporation at Tk 42 per litre. It claims that the cost will come down to Tk 6.50 per unit if the captive power unit owners are allowed duty-free imports.

The association vice-president, Mohammad Ali Khokon, told New Age on Tuesday that they were yet to get any response from the government. Inadequate supplies of gas and electricity, coupled with their frequent price hikes, have put the entire textile industry in serious crisis, he says. Khokon complains that the government policies in energy sector have shrunken scopes of value addition to industrial products, particularly textile.

The government raised the prices of electricity by 104 to 240 per cent for small to heavy industries between March 2010 and December 2017 without assuring uninterrupted power supplies. Net price of furnace oil was increased by 61.54 per cent, from Tk 26 per litre to Tk 42 in the past few years.

The government also suspended providing new gas connections for the captive power generation units leaving the entrepreneurs with no scope for setting up new textile factories or expanding their existing factories, Khokon said.

Asked over the issue, state minister for power, energy and mineral resources Nasrul Hamid said that it was for the petroleum corporation to decide the matter.

Brushing aside the proposal of the textile factory owners, petroleum corporation’s director operations Mir Ali Reza said that the corporation itself could supply furnace oil at a price less than Tk 10 to Tk 12 per litre if the government withdrew the duties and taxes.

Consumers Association of Bangladesh energy adviser M Shamsul Alam said that the government should allow every owner of captive power generation units, particularly those used in the export-oriented industries, to import fuels on their own as it would not affect the local market. The captive power plant owners should have the fuel oil import benefit under a uniform policy instead of dealing the cases individually, he put forth. He also suggested stopping duty-free furnace oil imports by the rental power suppliers as they had been charging extra from the state-run Power Development Board through over-invoicing.

Asked why the textile factory owners did not opt for uninterrupted power supply as ‘Q’ consumers, Khokon said that the price of electricity was too high for their business.

In 2012, Bangladesh Energy Regulatory Commission created the ‘Q’ consumer group aiming at uninterrupted power supplies to the industries at Tk 14.44 per unit.
Not a single consumer has so far applied for such power connection, said officials.