Govt under heavy pressure from LNG subsidies
Subsidy demand for two months after conflict started equals to Tk8,000cr allocated for whole fiscal year
Highlights:
- LNG subsidy costs surged after global gas prices doubled
- Two months' subsidies matched entire annual Tk8,000 crore allocation
- Monthly LNG subsidies increased to around Tk4,200 crore
- Finance ministry released only part of April subsidy request
- Bangladesh plans importing 11 LNG cargoes during May
- Delayed payments could trigger penalties and higher LNG premiums
The finance ministry is struggling to manage the sharp rise in LNG subsidy costs after international gas prices more than doubled following the Iran war.
Subsidy demand for just the first two months after the conflict started equals to the Tk8,000 crore allocated for the whole fiscal year.
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Finance Division officials said monthly subsidies for LNG imports have risen to between Tk4,100 crore and Tk4,200 crore since the war began. As invoices for spot market LNG must be paid within 15 to 17 days of delivery, subsidy payments have to be released quickly.
In April, Petrobangla's deficit from LNG imports stood at Tk4,220 crore. Against this, the ministry sought Tk4,200 crore in subsidies from the finance ministry. However, the finance ministry released Tk2,500 crore in April, which Petrobangla used to cover part of the import costs.
For May, the Energy and Mineral Resources Division wrote to the finance ministry on 7 May requesting another Tk3,500 crore in subsidies, citing plans to import 11 LNG cargoes during the month.
According to the letter, signed by Senior Assistant Secretary Rafiqul Islam, Bangladesh plans to import two cargoes under long-term contracts, one under a short-term contract, and eight from the spot market in May. Six cargoes are scheduled for the first half of the month and five for the second half.
The total cost of importing these 11 cargoes is estimated at Tk7,730 crore, while Petrobangla expects to earn Tk3,630 crore from sales. This would leave a deficit of Tk4,100 crore. Only Tk500 crore has been allocated for May subsidies, creating an additional funding need of Tk3,600 crore.
The Energy Division warned that failure to pay invoices on time would trigger late payment charges. It said delayed payments could also lead to extra premium charges on LNG purchases, increasing the deficit further.
The division has therefore requested the urgent release of Tk1,999 crore by 15 May and another Tk1,610 crore by 31 May in favour of Petrobangla to meet May's LNG subsidy requirements.
