Currency conversion, fuel theft cloud Padma Oil’s jet fuel operations

Highlights:

• Padma Oil's dollar conversions allegedly cost government Tk100 crore yearly
• Foreign airline payments converted immediately, then dollars repurchased costlier
• Investigation into currency practices delayed despite ministry deadline
• Officials accused of profiting from dollar trading scheme
• Repeated jet fuel thefts expose serious operational weaknesses
• Experts cite poor oversight, inefficiency, and possible organised syndicates

The state-run Padma Oil, Bangladesh's sole distributor of jet fuel, has come under scrutiny over allegations of financial mismanagement and repeated fuel theft incidents that experts say are exposing serious weaknesses in oversight and operational efficiency.

The financial controversy centres on Padma Oil's currency practice: dollars paid by foreign airlines for jet fuel are being converted into taka through private banks almost immediately. 

Experts say the practice is causing the government to lose over Tk100 crore annually.

Questions have also arisen over the effectiveness of the investigation committee, which failed to submit its report even a month after being directed to complete the inquiry.

Infograph: TBS

Besides, the latest controversy follows a recent jet fuel theft at Padma's depot at Chattogram airport, raising concerns over the company's ability to manage such a high-value operation.

Currency conversion

Padma Oil supplies jet fuel to foreign airlines operating through Bangladesh's airports. Under existing rules, international carriers pay for the fuel in US dollars. 

However, instead of retaining those earnings in dedicated foreign currency accounts, the dollars are being converted immediately into local currency through private banks.

Later, when Bangladesh Petroleum Corporation (BPC), parent company of Padma Oil, needs dollars to import fuel, it has to repurchase foreign currency at higher exchange rates.

According to sector officials, local and foreign airlines purchase around 1,600 tonnes of jet fuel daily. Based on annual sales of nearly 3,77,000 tonnes over the past year.

Mohammad Mohiuddin Chowdhury, finance and banking professor at Chittagong University,  said the practice creates unnecessary financial pressure on the state.

The state is incurring a loss of around Tk2 per litre due to exchange rate differences, he said. "For 377,000 tonnes of jet fuel imports, the estimated loss stands at Tk100 crore."

Energy expert M Tamim suspects some officials may be benefiting personally if the conversion is being carried out unofficially. "If done officially, the company is earning extra profits at BPC's expense."

Probe delayed despite ministry order

Allegations have also surfaced that the syndicate involved in the process is influential enough to delay investigations on Padma's dollar conversion practice.

The Energy Division formed a probe committee on 18 April and asked it to submit findings within five working days. More than a month later, the report remains pending.

Ishrat Reza, joint secretary of the division and member of the probe committee, said the investigation was taking longer due to the complexity of the case. 

"We have collected all the papers and will sit with other members soon to review them. The report will be submitted soon," she told TBS.

Md Mofizur Rahman, managing director of Padma Oil, said the delay is due to pending board approval and procedural complications.

Company insiders alleged that a syndicate led by Kanchan Chandra Shome, general manager of finance and accounts, who oversees financial management at the company, has been making profits by selling dollars and later repurchasing dollars for imports at higher rates.

Kanchan avoided detailed comments. "It is the responsibility of the general manager for marketing to maintain the account of foreign airlines," he told TBS.

M Tamim said identifying those involved should not have taken so long. "It is not a difficult task to trace such incidents. But in Bangladesh, probe committees are often formed only to bury the allegations, and in many cases the reports never see the light of day," he said.

Delayed opening of foreign currency account

BPC officials said they had long urged Padma Oil to open foreign currency accounts to receive dollar payments from international airlines. However, the company only recently opened a foreign currency account for jet fuel transactions after repeated directives.

Attempts to contact BPC Director (Finance) Nazneen Perveen and General Manager (Finance) Murshed Hossain Azad for comments went unanswered.

BPC General Manager (Audit) Jahangir Kabir said Padma has already opened such an account and now is receiving payments in foreign currency from international airlines. "The process has already begun. Now the key challenge is ensuring proper implementation."

According to him, conducting transactions with foreign airlines in dollars is more practical. "We import jet fuel by spending foreign currency. So if the earnings are also kept in foreign currency accounts, those reserves can be used during periods of dollar shortages," he said.

He added that maintaining foreign currency also helps BPC meet international payment obligations, including administrative expenses linked to foreign loans and trade financing.

'Organised fuel theft'

On 11 March, amid a severe fuel crisis, a tanker carrying 72,000 litres of jet fuel left the Godnail depot for Kurmitola, but never reached its destination.

Before the investigation into that incident could be completed, in an operation on 18 May, Coast Guard seized a lorry carrying 9,000 litres of jet fuel from a private depot in Patenga reportedly stolen from Chattogram airport depot. In the same drive the coast guard also recovered 5,000 liters of diesel.

A case was filed with Patenga Police Station on 19 May over the recovery. Investigating officer Shajib Ahmed said they were working to identify those involved in the alleged theft.

"There has been progress in the investigation, but it can't be disclosed at this stage," he said.

Five officials at the Godnail depot have been suspended, while all other employees there were transferred over the missing 72,000 litres of fuel, said Mofizur Rahman. He added that four more officials were suspended over the fuel recovery at Patenga depot.

Padma officials said jet fuel, one of the most expensive petroleum products in the market at around Tk205 per litre, is allegedly being traded openly by organised syndicates.

Energy expert Tamim explained, "Jet fuel is a type of kerosene. The stolen fuel may have been sold in the market as ordinary kerosene despite being a high-value product."

He added that the incidents reflect the company's inefficiency, both in preventing theft and in managing its financial operations.