Bashundhara Group seeks permission to import crude oil without LC

• Bashundhara Group has proposed amendment of the Import Policy Order to pave way for import without LC
• They also sought to lift cap of import volume
• Importers can import up to $5 lakh worth of goods without LCs
• The group has sought similar facility currently in place for rice import
• Consumer goods importers are importing products without LC due to the dollar crisis temporarily reducing pressure on the reserves
• A commerce ministry official said decision will be taken after reviewing Bashundhara's proposal

The Bashundhara Group, one of the leading conglomerates in the country, has sought permission to import crude oil from the spot market without opening letter of credits (LCs) amid the global economic downturn which triggered import hurdles.

As a result, the production of the group's oil refineries is severely disrupted, the group's Managing Director Sayem Sobhan wrote in a letter to the commerce ministry, and proposed amendment of the Import Policy Order to allow them to import crude oil without LC and any cap on quantity.

Industrial importers, under the existing import order, can import up to $5 lakh worth of raw materials, capital machinery and fire doors for use in their own factories without opening LCs. However, the cap is currently lifted for rice import without LC without under government arrangements.

Bashundhara Group has also sought the same facility for crude oil import.

In the letter sent on 12 February, the group wrote that it is necessary to keep the option to import any quantity of crude oil to ensure energy security.

Considering the importance of the private sector's contribution to energy security, the government has approved Bashundhara Oil and Gas Company Limited to set up an oil refinery. The project is contributing to the country's energy security by producing and marketing diesel, bitumen, naphtha from imported crude oil from 2019, the letter added.

For the imports without LC, the buyer and seller enter an agreement under which a LC is opened simply for banking formality. In this case, the buyer pays the price to the seller as per the time specified in the contract while the LC confirmation is not required and the bank does not give any assurance of payment to the exporter.

The prevailing dollar crisis situation is encouraging importers of consumer goods to import goods without letters of credit. In case of such imports, there is usually a possibility of late payment. However, the scope of importing without LC is temporarily reducing pressure on the foreign exchange reserves.

A Commerce Ministry official, requesting anonymity, told The Business Standard that a decision will be taken after reviewing Bashundhara Group's proposal.

It would not be appropriate to comment on it at this time, said the official.