M Azizur Rahman …..

State-run Rupantarita Prakritik Gas Company Ltd has initiated master sales agreements (MSAs) with 17 global suppliers separately to source liquefied natural gas (LNG) from spot market.

Final deals will be signed soon following the approval from the cabinet committee on economic affairs, a senior company official told the FE.

He said the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already decided, in principle, to import around one-fourth of the country’s total LNG requirement from the spot market to reap the benefit of falling prices.

Spot market is a public market in which financial instruments or commodities are traded for immediate delivery.

Spot market for the LNG was developed over the past several years with the gluts of LNG output alongside the growth of emerging markets for LNG (liquefied natural gas).

Market insiders said the Platts JKM, which represents the prices of spot cargoes delivered to northeast Asia, averaged around $4.93 per MMBtu (million British thermal unit) in the second quarter of 2019, down from $8.26 per Mmbtu a year ago.

However, state-run Petrobangla has been importing LNG under term deals within the range of around $8.5 per Mmbtu to $10 per Mmbtu over the past one year since April 24, 2018, when the first shipment reached Moheshkhali Island in the Bay of Bengal.

The imported LNG is re-gasified at FSRUs (floating, storage, re-gasification units) before it is added to the national grid for use by end users.

Officials said the 17 interested LNG suppliers have been selected following a competitive bidding.

They will provide fuel to the country’s LNG-receiving terminals from the spot market following instructions time to time, based on demand, said the officials referring to some features of the initials.

The RPGCL would initially make proposal to the selected firms specifying the quantity of spot LNG for supplying to the LNG terminals.

It would seek to purchase LNG from the selected firms under the final MSA.

The imported spot LNG should have a gross heating value ranging from 1,025 to 1,100 Btu per standard cubic feet (scf).

The imported spot LNG would require to be blended with locally-produced natural gas, which is sulfur-free and sweet gas, before it is delivered to the end-user.

The imported LNG’s sulfur content could be low as a result.

The selected firms would have to supply LNG on a delivered ex-ship basis and the vessel size should range from 125,000 cubic metre to 220,000 cubic metre.

The RPGCL will procure spot LNG based on market prices, terminal availability, increased re-gasification capacity and downstream demand.

Currently, two FSRUs, owned by US-based Excelerate Energy and local Summit Group, are currently re-gasifying around 580 mmcfd of LNG.

Both the FSRUs have the capacity to re-gasify around 1,000 mmcfd of LNG in total, said a senior Petrobangla official.

Planning Minister M A Mannan has recommended waiver of 5.0 per cent value added tax (VAT) on commission of indenting agents to facilitate their repatriation of foreign currency to Bangladesh.

He recently sent a demy official (DO) letter to Finance Minister A H M Mustafa Kamal, requesting him to consider the issue.

In the letter, Mr Mannan said the indentors have been recognised as ‘service exporters’ by the Ministry of Commerce for earning foreign currency.

As per the existing law, no VAT is applicable on the country’s exporters to help them stay competitive in the international market.

Earlier, the commerce minister also sent a letter to the finance minister with the same request.

Their recommendations came following demand of the Bangladesh Indenting Agents Association (BIAA) after imposition of 5.0 per cent VAT on them in the budget for fiscal year (FY) 2019-20.

Requesting VAT exemption, the BIAA President Rafiqul Islam Masum, in a letter, noted the Office of Chief Controller of Imports and Exports (CCI&E) awarded the status of ‘service exporters’ to the indenting businesses on December 11, 2018.

The planning minister, in his letter, also said the indentors are the representatives of foreign exporters, and are assigned to marketing their products in Bangladesh.

They also procure quality raw materials from the international market for the country’s export-oriented industries.

The indenting agents get their commission in foreign currencies from overseas companies for working as their local agents, Mr Mannan further said.

The indentors sent their commission or royalty in formal banking channel through proceed realisation certificate (PRC).

“VAT should be withdrawn for the FY 2019-20 on commission of the indentors as service exporters,” he added.

Talking to the FE, the BIAA former president K M H Shahidul Haque said there is a stay order of the Appellate Division on a writ filed against imposition of VAT on the indenting businesses.

He said the indentors are entitled to enjoy VAT exemption on their commission as ‘service exporters’.

Last year, VAT at a rate of 15 per cent was imposed on indenting commission, which has been brought down to 5.0 per cent in FY 20, he added.

However, the indentors are not paying any VAT due to the stay order of the Appellate Division.

Considering the indentors’ contribution in foreign exchange earning, the government had withdrawn 15 percent VAT on their commission in FY 2014-15.

As a result, the indentors were highly encouraged to repatriate commission, and the volume of repatriation increased tremendously.

However, VAT on repatriated indenting commission was re-imposed in FY 2016-17.

Industry insiders said the re-imposition of VAT may create a negative impact on the indentors’ repatriation of foreign currency to the country. Some of them may prefer to keep their money abroad to avoid payment of VAT on commission.

The indentors work for overseas companies, exporters, investors and consultants as agents for marketing their goods and commodities in the country.

There are some 2,500 members registered under the BIAA. However, the number of indentors is higher, as many of the indenting agents are not members of the association