Bangladesh faces fine of $117,309 for urea import payments and LC delays

The government is facing USD 1,17,309 in demurrage and fines in connection with two separate incidents involving delays in the settlement of letters of credit (LC) and payments for urea fertilizer imports from the UAE and Qatar.

A 15-day delay in LC’s confirmation of fertilizer imports from Fertiglobe in the United Arab Emirates under a government-to-government (G2G) contract resulted in a cargo ship sitting idle at Abu Dhabi’s Ruwais Port, resulting in a demurrage fee of $107,024, as results from the minutes of a recent inter-ministerial meeting.

In addition, Qatar’s Muntajat is seeking a penalty of $10,285 for an eight-day delay in payments for the supply of fertilizers under another G2G contract.

Mad Moniruzzaman, joint secretary and general manager (commercial), Bangladesh Chemical Industries Corporation (BCIC), disclosed this information during a meeting held on September 11 on production, import, distribution and storage of urea fertilizers.

The meeting, chaired by BCIC president Saidur Rahman, was attended by representatives of the Ministry of Finance, Bangladesh Bank, Power Department, Ministry of Agriculture and state-owned banks.

The Ministry of Agriculture has raised concerns about a potential shortage of urea fertilizers from the upcoming peak Boro season starting in December.

Bangladesh has an annual urea requirement of around 30 lakh tonnes, met mainly through imports.

According to BCIC, the projected urea demand by March 2025 is 18 lakh tonnes, with around 5 lakh tonnes currently in storage.

During the meeting, BCIC officials warned that delays in LC establishment, confirmation and payment will disrupt fertilizer imports. To deal with the crisis, they demanded urgent gas supplies to closed fertilizer factories, in addition to imports.

However, Energy Division officials informed BCIC that gas supplies to fertilizer plants are currently not possible due to disruptions in LNG imports due to financial constraints.

Bangladesh Bank officials at the meeting said foreign exchange reserves would not be used for these purposes to meet the terms of the IMF loan, which means banks must finance fertilizer imports from their own sources.

BCIC, which is responsible for the supply of urea, the basic fertilizer used by farmers, is preparing to announce an international tender as it has no other options to meet the demand for urea in the upcoming Boro season.

Due to the ongoing dollar crisis, Bangladesh charges penalty interest for late payment of gas and fuel oil import bills.

The government is also facing delays in payments for imports of urea and non-urea fertilizers. However, officials noted that this is the first time penalties have been imposed for late payments for fertilizer imports.

DG BCIC Moniruzzaman reported that there were delays in payments from Qatar Muntajat for the 13th and 14th lots.

The fifteenth payment due on July 17 was cleared by Janata Bank on July 25 due to delays in receiving dollars from Bangladesh Bank. This 8-day delay resulted in the Qatari bank demanding interest of $10,285, which, if not resolved, would jeopardize future fertilizer imports from Muntajat, he added.

DG BCIC has stated that LC confirmation is necessary for import of G2G fertilizers. Thanks to timely confirmation, the import of the first two batches from Dubai’s Fertiglobe went smoothly. However, Abu Dhabi-based Mashreq Bank later hesitated in confirmation LC.

At BCIC’s request, Fertiglobe agreed to deliver fertilizers without LC confirmation, stipulating that each new delivery would be loaded only after the previous batch had been paid for. Under this agreement, BCIC imported another nine batches of fertilizers, he added.

Moniruzzaman explained that the ship with the ninth batch arrived at Ruwais Port on July 21, but due to political unrest in Bangladesh, communication with Fertiglobe was temporarily disrupted, causing the UAE company to stop deliveries without LC confirmation.

After 15 days, Fertiglobe loaded the fertilizer after LC confirmation from Mashreq Bank, with additional guarantees from Sonali Bank, but with a demurrage fee of $107,024.

Bangladesh paid the bill for the ninth share from the United Arab Emirates five days after the scheduled date, he mentioned.

Moniruzzaman further noted that on September 1, BCIC had written to Sonali Bank requesting establishment of LC for 30,000 tonnes of fertilizers (11th batch) from Fertiglobe.

However, Sonali Bank was initially reluctant to open LC. After the intervention of government officials, the LC was opened on September 4, but is still awaiting confirmation from the foreign bank.

Bangladesh also delayed by 15 days the payment of USD 7.354 million for the 15th batch of fertilizers imported from Sabice, Saudi Arabia. The payment, originally due on August 5, was made on August 20, DG BCIC said.

Concerns about the urea crisis in the upcoming peak season

During the meeting, Moniruzzaman expressed BCIC’s deep concern over fertilizer supplies for the upcoming peak season.

He noted that almost all fertilizer factories under BCIC remain closed due to gas shortage. Letters have been sent to the ministry requesting gas supply and the issue has been discussed at various government forums, but no progress has been made so far.

The agriculture ministry has projected a demand of 32 lakh tonnes of urea for the current financial year, with a safety stock of 5 lakh tonnes.

In the financial year, 24 local factories produced only 6.46 lakh tonnes of fertilizers due to gas supply problems, which fell short of the target of 10 lakh tonnes. This production covered the demand for fertilizers during the mini-peak Aman season of July-September.

At the meeting, the BCIC chairman said that the current stock of fertilizers in the country is 4.35 lakh tonnes, while the demand for October and November is 4 lakh tonnes.

The peak Boro season starts in December and the total fertilizer demand is around 14 lakh tonnes from December to March, taking the total demand for urea fertilizers to 18 lakh tonnes by March next year, he added.