The Industries Ministry has asked the Finance Ministry to issue Tk 80 billion worth of government bonds to help state-run sugar mills settle their debts with six banks, officials confirmed.
The Bangladesh Sugar and Food Industries Corporation (BSFIC) currently owes Tk 69.50 billion to five state-run banks. The breakdown includes Tk 41.65 billion to Sonali Bank, Tk 14.65 billion to Janata Bank, Tk 4.68 billion to Agrani Bank, Tk 8.42 billion to Rupali Bank, and Tk 92 million to Krishi Bank.
Meanwhile, the BSFIC expects Tk 79.71 billion from the government as compensation for trade deficits and subsidies. It has proposed using the bond to settle its outstanding subsidies and reduce its dependence on bank loans.
In a letter, the Industries Ministry urged the Finance Division to act on the BSFIC’s request. Without bond issuance, rescheduling bank loans would require an upfront payment of Tk 1.66 billion and quarterly instalments of Tk 2.96 billion.
A BSFIC official noted that repaying the loans through its revenue is impossible due to mounting losses. The corporation, which oversees sugar mills, has repeatedly sought government subsidies to sustain operations.
Because the government did not pay subsidies on time, the BSFIC had to take loans to keep mills running. It is now struggling to cover salaries and operational costs through sugar sales.
Officials warned that without a waiver on loans, sustaining this agro-based industry will be challenging. Current debts are rising by Tk 10 billion annually due to interest.
A senior official said the initiative is aimed at helping struggling mills that have suffered losses for years due to outdated practices, raw material shortages, and mismanagement. However, some experts argue the plan could increase the government’s financial burden.
Despite repeated appeals, the issuance of bonds remains stuck in bureaucratic delays, sources revealed.
Government bonds, as defined by Investopedia, are debt securities issued to fund expenditures and obligations. These bonds pay periodic interest.
Under The Public Corporations (Management Coordination) Ordinance 1986, the government is required to compensate public corporations for losses caused by following specific government directives.
By law, the BSFIC is owed Tk 101 billion as compensation for losses incurred up to the 2023-24 fiscal year, but only Tk 21.31 billion has been paid so far.
BSFIC’s trade deficit has grown due to subsidized sugar sales, high operating costs, and insufficient raw materials. The previous government even shut down six sugar mills in 2020 to cut expenses.
Losses are mounting up, and since FY2005-06, the losses have reached Tk 91.75 billion, the Bangladesh Economic Review said. The BSFIC has been unable to meet regular expenses and service debts, the officials said.
The mills owe Tk 99.39 billion, including interest, to state-owned banks. With limited funds, it is not easy to cover costs. The government had provided Tk 2.80 billion in subsidies for FY24, but this did not solve the financial strain.
Mills produce below the demand for sugar on account of a lack of raw materials. At present, it is producing 0.21 million tonnes of sugars per annum by 15 mills under BSFIC whereas the country is required to produce over 2.2 million tonnes. The shortfall of 2.2-2.4 million tonnes of raw sugars is imported every year.
To make the mills profitable, the Industries Ministry is undertaking projects for sugar product diversification. As part of a five-year roadmap for 2022-23 to 2026-27, measures are planned to change around the fortunes of the sugar industry.
Loans taken by sugar mills were initially taken towards the benefit of sugarcane farmers. While farmers met their dues by providing sugarcane, the mills were the ones facing the difficulty.
In FY23, BSFIC made Tk 8.19 billion, but management costs more than Tk 15.34 billion. The mills lose Tk 10 billion, on average, every year.
Efforts to speak to BSFIC Chairman Dr Lipika Bhadra for comments were unsuccessful.
