The BPC on March 3 accepted an offer of the Kuwait Petroleum Corporation (KPC) to buy diesel with a sulphur content of 0.5 percent. Considering its harmful impact on environment, Bangladesh imports diesel with a sulphur content of less than 0.25 percent, sources said.

Burning petroleum releases huge amounts of sulphur dioxide that reacts with atmospheric water and oxygen to produce sulphuric acid. This sulphuric acid causes acid rain that affects soil and freshwater bodies. This is why most countries do not use petroleum that contains more than a tolerable level of 0.25 percent sulphur, the sources pointed out.

The KPC is scheduled to ship this diesel to Bangladesh on March 10 and 11.

On March 2, in the absence of the energy adviser and the BPC chairman, who were on leave, a BPC high official withdrew a proposal sent to the cabinet purchase committee for approval to buy 60,000 tonnes of standard diesel at slightly lower price from Mesfield--a Singapore-based private company.

Mesfield's price offer for purchase of 60,000 tonnes of diesel was Tk 2.5 crore lower compared to that of the KPC. And it is also offering the cash-strapped BPC a 180 days' delayed payment. In contrast, the KPC demands instant payment. Mesfield was picked as the best and lowest bidder in a spot tender.

As the BPC has an outstanding loan of over Tk 9,000 crore with different nationalised commercial banks (NCBs), it is facing severe liquidity crisis for the last two years. But the situation turned worst late last year when the NCBs refused to give it fresh loans with low interest rates.

Last month, the BPC finally turned to foreign banks. It is currently purchasing oil with $250 million loan from the Standard Chartered Bank that charges 14.73 percent interest rate.

Meanwhile, cash crunch and lack of planning led the country to a serious diesel crisis for the first time. The energy ministry then asked the BPC to ensure a diesel inventory with at least 35 days' supply. To meet this emergency mission, the BPC requested the KPC and the Indian Oil Corporation Ltd (IOCL) several times to supply diesel but they regretted.

This compelled the BPC to float a spot tender last month, in which Mesfield turned out to be the lowest bidder. The BPC at a board meeting on February 15 approved Mesfield's offer and sent it to the cabinet purchase committee for approval at its March 2 meeting.

But due to personal reasons, the BPC chairman was on leave and the energy adviser was abroad when the cabinet committee met. This provided the scope for another BPC high official to withdraw the proposal and go for purchasing low quality diesel from the KPC.

In a letter to the energy secretary on February 28, the BPC high official said the diesel inventory situation has improved and the Mesfield deal may now remain suspended.

Sources pointed out that the purchase from the KPC will not require the cabinet committee's approval as this is a state-to-state deal. Besides, the purchase from Mesfield would have violated a provision of the Public Procurement Regulation (PPR) that discourages spot tender that involves asking for bids verbally.

Since the BNP-led four-party alliance came to power, the government opted for unsolicited state-to-state purchase of oil, instead of buying it through open international tender. This has stopped deals with leading oil companies of the world.

"It is not clear if the present mechanism ensures cost effective and environment friendly procurement. But certain officials are strangely comfortable with unsolicited oil purchase on rigid terms," noted a BPC source.