NBR may slap 15pc VAT, 2.0pc AIT on import of LNG

FT ONLINE

The country's energy regulator is waiting for issuance of a Statutory regulatory order (SRO) by the National Board of Revenue (NBR), waiving supplementary duty (SD) and customs duty (CD) on import of LNG, before announcing a fresh hike in gas tariff, said officials.

The state-run Petrobangla might have to pay 15 per cent VAT (value added tax) and 2.0 per cent AIT (advance income tax) to public exchequer, as the government high-ups have decided to keep the domestic natural gas prices at 'rational' level to provide respite to the consumers.

A decision to waive the duties has already been made following a series of discussions among Prime Ministers' Office (PMO), Ministry of Power, Energy and Mineral Resources, National Board of Revenue (NBR) and Petrobangla.

Procedural mechanism is delaying the SRO issuance, a senior Petrobangla official said.

"We require getting the SRO to evaluate the necessary issues before announcing a new gas tariff," a senior Bangladesh Energy Regulatory Commission (BERC) official said.

Petrobangla, however, is arguing the necessity to waive AIT as well against LNG import.

As Petrobangla will not earn any profit out of re-gasified LNG (liquefied natural gas) sales to consumers, charging of AIT and re-imbursement of tax from NBR by year-end might be complex, he said.

Separately, NBR is expected to waive the existing 93.25 per cent SD, currently being charged by NBR on gas sales.

"With the current tariff structure the weighted average price of natural gas stands at around Tk 9.30 per cubic metre," Petrobangla director (finance) Md Tawhid Hasanat Khan said.

But Petrobangla sells gas at an average price of Tk 7.39 per cubic metre, incurring loss of around Tk 2.0 per cubic metre, he also said.

Bangladesh has started supplying re-gasified LNG to Chattogram consumers following commencement of commercial supply of LNG from Excelerate Energy's Moheshkhali FSRU on August 18, around four months after entry of the LNG-loaded FSRU.

Excelerate's FSRU vessel - Excellence - carried 136,000 cubic metres of lean LNG from Qatar to Moheshkhali terminal on April 24 to start its commercial delivery from May 07.

But technical issues and rough seas during the June-August monsoon in south-west kept it stranded off the south coast of Chattogram for more than three months.

Excelerate docked and connected the FSRU to the subsea pipeline network on August 05 and started injecting gas on August 12.

The company has been charging Petrobangla fees worth US$ 232,000 daily since the commissioning of its vessel at Moheshkhali on August 18, no matter the quantity of LNG it re-gasifies.

Existing and new consumers of Chattogram are now receiving around 300 million cubic feet per day (mmcfd) of re-gasified LNG. But Excellence has the capacity to re-gasify around 500 mmcfd.

KGDCL is responsible to supply natural gas to Chattogram and its adjoining areas.

With the existing tariff structure, the blended gas price will be around Tk 10.91 per cubic metre after importing around 500 mmcfd equivalent of LNG at $ 10.76 per cubic metre.

Petrobangla, however, has been unloading LNG with enjoying exemption from payment of SD and CD, but paying 15 per cent VAT and 2.0 per cent AIT following an interim order of NBR.

NBR will allow Petrobangla to import LNG with duty benefits until the final order is issued.

BERC has planned to fix a new gas tariff considering blending of the imported LNG with locally produced gas, a senior BERC officials said.

Petrobangla and all its subsidiary gas marketing and distribution companies have earlier argued to BERC for the hike in domestic natural gas tariff to foot LNG import bills.

Petrobangla demanded the blended gas price at Tk 9.69 per cubic metre after importing around 500 mmcfd of LNG.

BERC held public hearings from June 11 on the gas tariff hike proposals from the state-run gas companies, which sought almost doubling the rate for consumers except households.

The regulator earlier raised the natural gas tariff by 22.70 per cent for all types of consumers in phases with effect from March 1, 2017 and June 1, 2017 respectively.