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Present government hasn’t changed rate for KAFCO |
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September 20, 2000
Dhaka (UNB) - The Industries Minister said here yesterday the present government had neither set any new gas rate for Kafco nor changed the formula of gas pricing fixed by the previous regimes. “We just put forward the IFC recommendations to the Prime Minister. So far we didn’t accept anything,” Tofail Ahmed said, when asked to comment on whether government agreed to supply gas to Kafco at subsidised price for eight more years beyond 2005 at the cost of national exchequer. A high-level meeting on Sunday chaired by Prime Minister Sheikh Hasina reviewed the recommended revisions and changes of previous deals to make the misconceived fertiliser factory a viable concern and safeguard country’s maximum interests. International consultant IFC, among other things, prescribed extension of gas subsidy for Kafco up to 2013. “The agreements concluded in 1990 and 1993, when Ershad and Khaleda Zia were in power respectively, determined the gas price. And the rate was not fixed by the present government,” he said. Tofail said the government is trying to review and renegotiate the existing agreements to improve its terms and conditions. In quite a few issues, he said, the government is successful in persuading the international shareholders, lenders and other parties in the contracts to agree to change the terms and arrangements in favour of Bangladesh. He said as per the previous contracts the Kafco was to pay back the loans by 2005, but indecision and corruption during the JP-BNP period delayed the repayment process. 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 100 million dollars. The multi-million dollar project for gross flaws in deals and clauses clashing with national interest turned a burden for the nation at the very beginning. 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. The Bangladesh government did not so far get any return from its Tk 200 crore investment. Rather it had to hold the 100 per cent guarantee for Kafco’s export credits of USD 182 million although government shares only 43 per cent of the company. 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 signed in 1993. Previous deals made it compulsory for Bangladesh to supply gas to Kafco at a subsidised rate and to purchase fertiliser at international price. Government has to seek prior permission for purchasing urea even for domestic use. Since assuming power, Tofael said, 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. The IFC recommendations, placed in Sunday’s meeting, included asking contractors to pay US$ 31.1 million in compensation for technical faults, purchasing gas directly from BGSL through a bilateral deal with Kafco, seeking time from lenders for a respite of two-year or more to repay loan installments. |