The National Board of Revenue is expected to get Tk 2,000 crore in customs duty on furnace oil import as the national budget for the fiscal year 2020-2021 proposed scrapping of the duty-free import facility for the item used mainly in power plants.
Customs duty at the rate of 12 per cent became applicable to import of the product from June 11, the day of the budget announcement, following the withdrawal of the benefit.
The power plants had been enjoying the duty-free furnace oil import benefit since 2011 as the government offered the benefit to encourage electricity generation in the country.
The revenue board lost a total of Tk 10,176 crore in duties and taxes due to the waiver, according to the NBR data.
The duty waiver stood at TK 1,974 crore in July-May of the current FY20 against the imports of 15.18 lakh tonnes of furnace oil.
Finance minister AHM Mustafa Kamal in his budget speech said that the benefit had been proposed to withdraw to discourage the installation of furnace oil-based power plants as the alternative fuel had already been available.
Power plants have been built based on alternative fuel to generate electricity at an affordable price, he said.
NBR officials said that the government’s subsidy in the power sector had been increasing substantially.
So, the benefit was required to withdraw to lower the subsidy, they said.
According to an Institute of Energy Economics and Financial Analysis report, the amount of subsidy in the power sector accounted for Tk 8,000 crore in FY19 although around 57 per cent of power production capacity of the sector remained unutilised.
Officials said that though power generation using furnace oil declined, the import of duty-free furnace oil increased significantly.
In FY 2012, the country imported 3.19 lakh tonnes of furnace oil, which stood at around 18 lakh tonnes in FY19.
The current production capacity of furnace oil-based power plants is 5,434 MW with a cost of Tk 13.77 per kilowatt power.
The cost is only Tk 2.72 per kilowatt in gas-run power plants.
The current power generation capacity of the country is 19,788 MW.
The officials, however, said that the withdrawal of the duty benefit would not affect the private power plants as the import bill of furnace oil was paid by the Bangladesh Power Development Board.
PDB officials, however, said that it would increase the cost of the board due to the withdrawal of the benefit.
There is no question of losses for the PDB as it pays the bill after getting subsidy from the government, they said.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Tax