How Karnaphuli Gas skips paying Petrobangla Tk3000cr in gas bills

Infographic: TBS

Karnaphuli Gas Distribution Company, as a subsidiary of state-owned Petrobangla, is supposed to deposit all its gas sales proceeds to the parent organisation as other distribution companies do. But it has not handed over Tk3,000 crore, earned from fertiliser joint venture Kafco as additional gas price, to Petrobangla, official accounts show.

Instead, the state-owned gas distribution company has been benefiting from the accumulated funds for years, ignoring repeated letters from Petrobangla and recommendations made by a probe committee last year.

The unrealised arrears accumulated for 13 years have added to the financial woes of Petrobangla, which is struggling to pay for imported liquefied natural gas (LNG) and the gas it purchases from international oil companies.

Sources at Petrobangla – Bangladesh Oil, Gas, and Mineral Corporation – told The Business Standard that Karnaphuli Gas earned the money from gas sales to Karnaphuli Fertiliser Company (Kafco), a joint venture multinational company, at a rate higher than what the Bangladesh Energy Regulatory Commission (Berc) set for state-owned fertiliser companies.

The government provides gas to state-owned fertiliser factories at a subsidised rate. However, Kafco is required to purchase gas at a higher rate.

How the dues grew

According to Berc, Karnaphuli Gas is supposed to pay all earnings from gas sales except for distribution charges, to Petrobangla. However, this has not occurred since the company's incorporation in 2010.

Until June 2019, Karnaphuli Gas's additional earnings from selling gas to Kafco amounted to Tk9.29 per unit, as it charged the fertiliser company Tk12 per cubic metre while the Berc-set rate was Tk2.71.

By June 2022, Karnaphuli Gas's additional earnings from Kafco had decreased to Tk7.55 per cubic metre, as the regulator raised the price of gas for the fertiliser sector to Tk4.45 on 30 June 2019.

However, the distribution company now sells gas to Kafco at Tk30 per unit, while the rate for state-owned fertiliser companies is Tk16 per unit, according to the latest tariff adjustment on 18 January 2023.

Instead of paying Petrobangla the additional amount, Karnaphuli Gas has been holding on to the money, in violation of gas distribution guidelines and Berc's orders.

As of February 2023, Karnaphuli Gas has withheld a staggering Tk3,093 crore, the additional earnings from gas sales to Kafco.

To retain the additional gas price earned from selling gas to Kafco, the Energy and Mineral Resources Division formed a committee on 23 July 2023.

After two months, the committee submitted a report with two recommendations: Kafco would pay the Berc-fixed rate for gas prices in the fertiliser category, with the additional tariff amount paid directly to Petrobangla; and Petrobangla and Karnaphuli Gas would determine the exact receivables for Karnaphuli Gas.

One year has passed since the report was submitted, but no progress has been made on the issue.

Why Karnaphuli Gas ignores Petrobangla's call

Prior to the formation of Karnaphuli Gas Company, Kafco was a customer of Bakhrabad Gas Distribution Company, which used to deposit the additional money received from Kafco to Petrobangla, according to a document from Petrobangla.

However, Karnaphuli Gas stopped depositing the additional money gained from Kafco after it began operations in 2010. In February 2018, the Energy and Mineral Resources Division directed the company to deposit 50% of the additional earnings to Petrobangla, which most energy experts viewed as a total violation of Berc's order.

As a result, Petrobangla has sent dozens of letters to Karnaphuli Gas, requesting a detailed report on the volume of gas supplied to Kafco since 2010, the price of the supplied gas, and the amount received from Kafco. However, the gas distribution company has neither provided the required report nor deposited the money on a regular basis.

When asked about the additional earnings from Kafco, Md Abdul Mannan Patwary, managing director of the distribution company, told TBS, "We are willing to transfer the excess profit to Petrobangla once we receive the ministry's order."

"If the energy ministry decides that Petrobangla should receive the entire amount of additional profit, we will comply. If it is determined that our company will retain 50% and the remaining 50% will go to Petrobangla, we agree to that as well. We hope the energy ministry resolves this matter soon," he added.

Petrobangla officials, who wished not to be named, said some top energy ministry officials are on the Karnaphuli Gas governing board, who back the distribution company in withholding the funds.  

According to Karnaphuli Gas's organogram, the Energy Division secretary holds the position of chairman of the company's governing body and out of the company's nine board members, four are from the Energy and Mineral Resources Division.

The management and staff of the company receive annual profit bonus from the accumulated money kept in various banks.

The amount was Tk5.96 lakh in the 2022-23 fiscal year, down from Tk18 lakh in the previous fiscal year.

When contacted, former Energy Division secretary Nurul Alam said, "We have not received any money from Kafco yet. Although the payment was due, Kafco has not paid the money," he told TBS.