Bangladesh Case: SG will Discuss Fertilizer Projects with FM Malaysia in KL, Malaysia

Kuala Lumpur, Malaysia | August 25, 2008 by D-8 Secretariat

How much subsidy Bangladesh government needs to pay during the current season of cultivation, when the global market price of Urea [Prilled or Granular] is between US$ 800-860? If the government has to ensure supplying Urea to the farmers at a tollerable rate, the nation will need to spend almost TK. 40,000 per ton as subsidy as the Bangladeshi government continues to fail in collecting Urea fertilizer at a much lesser rate, although a very solid company from North America is offering Urea to the country at much lower price.

According to information, Bangladesh, during the current year collected more than 1.2 million tons of Urea from local and foreign sources. Although production cost of each ton of Urea is below US$ 100, even local companies like KAFCO [which is a joint venture under the control of foreign owners] sells urea to the government at the rate of US$ 800 plus, while the same company supplied urea at the rate of US$ 150-200 last year.

Major stake of urea is procured in Bangladesh by state owned Bangladesh Chemical Industries Corporation [BCIC]. This enterprise has incorporated several ridiculous clauses in the purchase process, being suggested by an organized racket, to stop most of the potential foreign suppliers from making offers at much lower price. According to latest information, Bangladesh presently required around 350,000 tons of urea, which should be imported from foreign countries. A local businessman owning a number of companies namely Bulk Traders, Desh Traders etc., made offers to BCIC for supplying urea and even recently the same company obtained a contract for 200,000 tons. But, according to information, the local businessman has been continuing to fail in furnishing performance guarantee to BCIC thus killing time, while the same company has failed to complete its contractual obligation in delivering urea to BCIC, for which they already submitted performance bond and received letter of credit. It is even rumored that, the racket continues to do monopoly business in BCIC by managing some of the corrupt officials of the enterprise as well as ministry concerned. On investigation it is even revealed that, in many cases, fake bid bonds or even forged performance bonds were submitted by this racket, and the matter is suppressed by some corrupt officials of BCIC. Commenting on this broad day robbery, an official with BCIC on condition of anonymity told Weekly Blitz that the matter and the entire process of bidding as well collection of urea fertilizer needs to be properly investigated by the members of Task Forces urgently for the sake of national interest. Due to such organized crime, the nation will suffer a loss of few hundred million dollars only during the current fiscal year.

Bangladeshi state owned enterprise as well the ministry concerned are having a pre-conceived mind of determining price of urea on the basis of information provided by some publications, mostly owned by traders of fertilizer manufacturers. But, in reality, in most cases, prices in such publications are not within the nearest realities. Bangladeshi government signed contracts with countries like Saudi Arabia, Kuwait etc., for importing urea on state-to-state contract at the price of US$ 870 plus per ton, while, for example, Israel offers the same urea to its friendly nations at the rate of US$ 300 per ton. As Bangladesh continues total ban on Israel, Bangladeshi businessmen or state owned enterprises are not able to buy urea from any of such sources. It may be mentioned here that, although countries like Saudi Arabia and some other Arab nations have committed to supply urea to Bangladesh on state level contract at a price of US$ 900 per tons, the same nations are buying urea from various sources including Israel at the price of US$ 500-700.

Meanwhile, a Canadian company, having firm grip in fertilizer business has come forward in offering urea to Bangladesh at a much cheaper rate with quick shipment guarantee. Local representative of the Canadian firm told Weekly Blitz that they can offer urea to local, regional or global buyers at a much cheaper rate. It is learnt that Chief Executive Officer of the Canadian company applied for visa to participate in the forthcoming tender floated by BCIC for procuring 212,500 tons of urea fertilizer in August. But, the same well organized racket has already delayed the process of issuance of visa to the CEO of the Canadian company with the goal of stopping them from participating in the tender. It is anticipated that the same racket, which already has failed to keep commitments of supplying fertilizer to BCIC is getting set to offer urea at a higher price. According to business norms, the same rakcet should already have been black listed by the Bangladeshi government for non-compliance of contractual obligation as well legal actions should have been initiated against them for forging bid bonds, performance bonds and other documents. But, due to over enthusiasm of some corrupt officials with BCIC and the ministry, the racket continues to run monopoly cashing of money, thus pressing the nation towards a serious fertilizer crisis in the months to come.

It is even learnt that some vested interest groups are willing to force the present government towards adverse situation by creating shortage of fertilizer. For the sake of national interest, the government can take steps in simplifying the bidding process of BCIC thus giving chance to potential suppliers, who can supply urea to Bangladesh at a much cheaper price with assurance of immediate shipment. Commenting on this, representative of the Canadian company said, they are holding a stock of 500,000 tons of prilled and granular urea fertilizer, which can be shipped anytime. It said, crazy trend is continuing with urea trade in Bangladesh as well in the world. Some suppliers are asking exorbitant price while some organized racket are giving alluring offers of US$ 200-250 per ton to buyers, with the ulterior motive of cashing the letter of credit and disapprearing from the show. It said, any offer for urea below the price of US$ 500 per ton for FOB is really unbelievable. Commenting on Israel’s price for urea, it said, it is a state offer, and there is no reason to have any doubt on it. But, in general, businessmen or traders can never get urea at this price from any of the sources in the world.

The Canadian company’s representative further said, urea market will remain unstable till 2015, as most of the stocks are already purchased by large conglomerates in the world. Bangladesh government needs to realize this fact and take immediate steps not only in ensuring smooth supply of urea during the current season but till the uncertain period is over. It said, if Bangladeshi government will agree, a smooth supply of urea at a competitive thus much lower price can be ensured till 2018. Such initiatives by the government will help the nation from saving a few thousand crores of Taka. But, for this, the government at first needs to form a high level inquiry committee with members of armed forces to investigate the ongoing corruption, irregularities and massive fraud inside BCIC by the organized racket which already looted a few hundred crores of Taka from the national exchequer.

“This is a situation that demands a further discussion within our organization,” said Dipo Alam, the D-8 Secretary General. He said that as one of the results from the recent Summit of D-8 in KL last July, D-8 has initiated a framework of cooperation in a Food Security Program. The program set forth some plans for fertilizers projects in D-8 countries.

Dipo Alam said that he is scheduled to talk further about this issue with H.E FM Malaysia Dato’ Seri Utama DR. Rais Yatim on August 25th, 2008, as a follow up from the KL Summit last July.

Newsource: WEEKLY BLITZ .

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