Production costs will increase following this hike in gas price after within a week of the power tariff increase. As a result the price of goods is likely to increase once again, which would affect inflation rates. It is the people who eventually suffer.
The price of gas and electricity has been in increasing through a series of public hearings at Bangladesh Energy Regulatory Commission (BERC) since 2009. The price could not be hiked randomly because of the check and counter-checking in that system. But the government has taken the authority to raise energy prices into its own hands by amending the BERC laws in December last year. The government did this to “adjust the prices regularly”. Following this, the announcement was made concerning the increase in gas and power tariff by executive order.
The Energy and Mineral Resources Division issued a gazette notification about the new prices on Wednesday. Later it issued a note of explanation saying that the government has raised the price of gas to be used in power, industry, captive and commercial sectors to meet the demand of gas by buying LNG (Liquefied Natural Gas) at high price from the spot market.
The government, before raising the price, took the opinions of stake holders to meet the increasing demand of gas for ongoing agricultural season, during the coming Ramadan and for power generation in the next summer and to ensure uninterrupted flow of gas in industries.
Highest hike in power sector
The gas price hike was the highest in the power sector. The rise is 179 per cent for both government and private power plants.
Currently, both the government and the private power plants are spending Tk 5.02 for a unit of gas. The price has been nearly tripled to Tk 14. Power sector said Power Development Board (PDB) could be in Tk 400 billion deficit even if it gets all types of required fuel, including coal and fuel oil, at current price. The government has allotted Tk170 billion as subsidy this year. Now the deficit would increase with this hike in gas price.
Over 50 per cent of power is produced at plants run by gas. As a result, the power tariff also could be hiked. The industries that do not have captive power plants also will face pressure of extra expense.
Speaking to Prothom Alo, Khondaker Golam Moazzem, senior research director at Centre for Policy Dialogue (CPD), said, “Sustainable solution lies in increasing production at home, not in hiking the price. Now the power tariff could also increase due to gas price hike. This will create more pressure on the consumers. Price adjustment does not mean putting the burden of additional price on the consumers. Raising prices without amending the government’s policies is unethical.”
Price hike not reasonable
Earlier, the gas price was different for the large, medium and small industries. This time the price has fixed at same rate, Tk 30 per unit, for all including for captive power plants for industries. The highest rise is for the small and cottage industries followed by medium and large industries. The commercial users of hotel and restaurant categories will have to pay Tk 30.5 instead of Tk 26.64 for each unit of gas.
The government in July last year stopped importing LNG from spot markets to save forex reserve of dollar as the price of LNG increased a lot. The production of gas in the country also declined. This created supply crunch. The industry owners demanded gas import at higher price to open their factories. They held several meetings with the government and agreed to pay Tk 25 for every unit on condition of getting uninterruptedly. The industry owners said the sector will be destroyed if they do not get gas even after raising the price.
Economists said the actual income of people is decreasing due to high inflation rate. The prices of goods have increased in the market after the record price hike of fuel oil by 42.5 to 51 per cent in August last year. Now the price of goods produced at small and medium scale factories will also increase due to the gas price hike following increase in power tariff.
Speaking to Prothom Alo, Jasim Uddin, president of Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), the apex body of traders in the country, said, “It was not proper to increase the gas price so much at one go. Ultimate the pressure will be on the consumers.”
He also said, “Fixing same price for small, medium and large scale industries at Tk 30 was also not reasonable. Small and medium scale industries will face crisis for this. An interference of prime minister will be required here.”
Current demand of gas every day in the country is 3.8 billion CFT while the capacity to supply is 3.76 billion CFT. Currently, the daily supply is 2.66 billion CFT. The supply of gas in industries could be somewhat ensured if every day supply could be 3.1 billion CFT.
However, the traders and experts are concerned as to whether the government will be able to ensure uninterrupted supply of gas even after hiking the price. They said the government could realise more money by increasing the price but buying LNG would require dollar and the dollar crisis in the country is not over.
Speaking to Prothom Alo, Consumers Association of Bangladesh (CAB) senior vice president M Shamsul Alam said, “Mismanagement in the sector is being hidden by hiking the prices more often. (The government) has brought down LNG import to half by hiking gas price by 23 per cent. Where has the extra money gone? That’s why the price will go on increasing. The power tariff will also be hiked in the future. The crisis will be as it is. Energy security is already at stake.”