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Government’s major decisions revising KAFCO deals |
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September 18, 2000
Dhaka (UNB)- The government took major decisions revising the KAFCO deals changing some disputed conditions to make the troubled fertilizer company a viable concern safeguarding country’s maximum interests. A high-level meeting chaired by Prime Minister Sheikh Hasina yesterday discussed in detail the problems facing the multi-million-dollar project since its inception in 1990 and adopted bailout measure. The meeting, also attended by Finance Minister Shah AMS Kibria, Industries Minister Tofail Ahmed and State Minister for Energy and Mineral Resources Prof Rafiqul Islam, pointed out flaws and limitations in the previous KAFCO deals and remedial measures suggested by the international consultant. As per the amendments, contractors will now have to pay US$ 31.1 million in compensation for technical faults that delayed commercial production and caused frequent suspension of operation of the giant fertilizer factory of the multinational company. Tripartite agreement for gas purchase has been changed, and now the Karnaphuli Fertilizer Company will have to buy gas direct from BGCL under a bilateral agreement. Besides, IFC has also recommended a respite of two years or two years and a half for repaying the debts in installments by KFCO to lenders and rescheduling of KFCO loans in five to 8 years. The Karnaphuli Fertilizer Company project was undertaken in 1990 and scheduled to complete in January 1994. But the work was stalled for one year, raising the project costs by one million dollars. Moreover, mechanical and technical faults forced the factory to suspend production 37 times from 1995 to 1997, depriving the company of 80 million dollars in revenue. Since assuming power, the present government has taken initiative to identify the problems faced by the company and remove technical and mechanical faults. As a result, the factory has been operating to its full capacity since the middle of 1998. “But drastic fall of fertilizer prices on international market again pushed the company to financial crisis,” the meeting noted. Meanwhile, the International Finance Corporation (IFC), an affiliation of the World Bank, has been appointed to prescribe measures for reorganising the Kafco. The measures taken up by the government reflected the IFC recommendations. The meeting identified some weakness in the agreement with Kafco and said as per previous agreements Bangladesh government was to give 100 percent guarantee against the company’s export credits of USD 180 million, although the government shares only 43 percent of the project. If the Kafco failed to pay any installment of the loan, the government was to repay all the debts because of the Achilles’ heel in the misconceived original deals. As Kafco defaulted loan installments due to disruption of production for technical and other reasons, the government has not so far got any profits from its Tk 200 crore investment in the venture. Rather, it shouldered the cent percent guarantee of Kafco loans and was giving gas at subsidized rate and buying fertilizer from the company at international rate. Previous agreements also made it compulsory for the government to seek prior permission for purchasing urea for domestic use. The meeting said a mutual agreement is being followed for supplying gas to Kafco. According to the agreement if Kafco fails to pay the bills of gas, then the state-owned BCIC will have to pay the price. |