Gas price hike: New investment to face ‘unfair competition’

Amid a slowing economy, high interest rates on bank loans, rising inflation, and political uncertainty, gas prices have been increased for new factories.

This gas price hike will put new investors under an unfair competition and discourage investment, business leaders have said.

On Sunday, the Bangladesh Energy Regulatory Commission (BERC) increased gas prices for new industries by 33 per cent. Additionally, new industrial consumers will now have to pay higher rates if their gas usage exceeds 50 per cent of their approved load.

Existing factories will also face higher prices for any gas use beyond their approved limits.

According to business leaders, this pricing structure creates a discrimination in the industrial sector. Older factories will continue to receive gas at lower prices, while new entrants will be forced to pay significantly more, making fair competition difficult.

Speaking to Prothom Alo, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Mir Nasir Hossain said, “The lack of policy consistency is a major barrier to investment in Bangladesh. This disproportionately affects new entrepreneurs, who often struggle to cope with pressure. With the gas price hike, investors - both domestic and foreign - will take even more time to make decisions.”

Economists said private investment as a share of GDP in Bangladesh has consistently remained below desired levels.

There is a concern that private investment is declining.

In FY 2021–22, the private investment to GDP ratio was 24.52 per cent. By FY 2023–24, it had dropped to 23.96 per cent.

If investment is not increased significantly, the rate of job creation decreases, which causes an adverse impact on the income of the people. Youth do not get expected jobs. As a result, the overall standard of living is closely tied to investment activity.

Official data shows that foreign direct investment (FDI) in the first six months of FY 2024–25 was only $213 million, down sharply from $744 million in the same period the previous year.

Key indicators like private sector bank loans and imports of capital machinery also reflect a sluggish investment environment.

Bangladesh Bank reports that private-sector credit growth hit a 10-year low of 6.82 per cent in February 2025. Meanwhile, capital machinery imports dropped by around 25 per cent from July to February. The disbursement of long-term loans in the industrial sector is also declining.

Since the interest rate on bank loans was made market-based, it has been rising. Currently, the rate has exceeded 15 per cent. As a result, project loans to the private sector have decreased in banks.

Sources at the top 10 public and private sector banks said since mid-last year, banks have been avoiding new projects. Some banks have even suspended previously approved loans due to the political situation. Additionally, the rising interest rates have further reduced interest in initiating new projects.

Speaking to Prothom Alo, NCC Bank additional managing director Khorshed Alam said, “Interest rates aren’t the only factor discouraging investment. Even when rates were 17–18 per cent, investments still came. But without stable power and gas supply, improving the investment climate is impossible.”

He added that due to a dollar shortage, many businesses still can’t import essential capital machinery or raw materials. With the gas price hike, the ultimate burden may fall on consumers.

During the tenure of the Awami League government, which was ousted in the student-people uprising in July last year, less emphasis was placed on extracting gas from domestic mines, with a greater focus on importing gas from abroad.

In 2018, the import of liquefied natural gas (LNG) by ship began.

Critics argue that the government at the time opted for gas imports to benefit certain businesses in the energy sector.

When Bangladesh began importing gas, global market prices were relatively affordable. However, gas prices began to surge rapidly after the Russia-Ukraine war broke out in February 2022.

At the same time, the value of the US dollar rose sharply, and the pressure of imports began to deplete the country’s foreign currency reserves.

The Awami League government, which initiated gas imports to boost supply to industries, raised industrial gas prices by up to 178 per cent in 2023.

Although the price hike was justified as necessary to increase supply, the actual supply did not improve significantly - yet the industrial sector had to bear the burden of the steep price increase.

Now, under the interim government, Bangladesh Energy Regulatory Commission (BERC) on Sunday raised the gas price for new industries to Tk 40 per unit, up from Tk 30. The rate has risen from Tk 31.50 to Tk 42 for captive power plants.

The new rates took effect last Sunday, applying to all gas connections approved after 13 April. Existing applicants will face higher charges only if they exceed 50 per cent of their approved load.

Speaking to Prothom Alo, Mir Nasir Hossain said the method being used to determine gas prices is not right. VAT is being applied twice - at both the import and distribution levels - along with operating and development costs, to set the final price.

“Why must all the burden fall solely on businesses?” he asked.

The former president of FBCCI stated, “Gas theft is continuing, yet nothing is being done to stop it. Instead, prices keep rising to offset those losses. Why should we have to bear the consequences of the gas companies’ inefficiency? How much longer can this continue?”

Although the official technical loss rate for gas is about 3 per cent, international standards allow for only 0.2–0.3 per cent. It’s alleged that stolen gas is often disguised as technical loss.

According to BERC data, 1.37 billion cubic meters of gas was lost as “technical losses” in the first half of FY 2024–25. Given that it costs Petrobangla Tk 79.34 per unit to import and distribute LNG, the resulting loss was approximately Tk 108.70 billion.

Gas is essential for industrial processes - from powering captive plants to running production lines. Yet despite the inconsistent supply, prices continue to climb.

Speaking to Prothom Alo, former president of the Dhaka Chamber of Commerce & Industry (DCCI), Rizwan Rahman said by setting two different gas prices for the same product, the government is creating discrimination among businesses and encouraging unethical market practices. It’s sending the wrong message to investors. Otherwise, how could such a price hike come right after a major investment summit.