Govt aims to hike gas price in industries

The price of gas for industrial use was raised by 150-178 per cent with the promise of uninterrupted supply just two years ago. The price was increased last year too but the crisis of gas in the industrial sector has not dissipated.

Now the government wants to hike the price by 2.5 times, with the promise of boosting the supply.

Bangladesh Oil, Gas & Mineral Corporation (Petrobangla) sent a proposal to the Bangladesh Energy Regulatory Commission (BERC), taking the approval of the energy division.

It proposed to raise the per unit gas price from existing Tk 30.75 to 75.72. The entire gas bill will be calculated in new price for the new connections while the proposal said about some concessions for those with older connections.

There are two types of gas connections in the industries. One is taken to operate boilers and the other is for captive power plants for larger industries. Currently the unit price is the same for both types of connections.

The Petrobangla proposal said the bill for the use of additional amounts of gas exceeding the approved limit by older consumers will be calculated at the new price. The industries that were promised for connections will have to pay 50 per cent of their approved load limit at the previous price and the bill for the remaining amount of use will be calculated at the new price.

Petrobangla, in the proposal, presented a picture of the gas use in the industries. According to the report, the industries used more than 1.478 million cubic metre gas between November 2023 and October 2024. The amount of such additional use by the captive power plants in the same period was 57.6 million cubic metre gas.

As per the proposal, the costing for such additional use by old consumers will be made through the new rate.

Petrobangla acquires gas from two sources. They buy gas from various local gas companies at a cost of Tk 6.7 per unit. But they pay more than Tk 75 for importing liquified natural gas (LNG). That is why the government agency is incurring loss and the government does not want to continue subsidising anymore. In this context, Petrobangla is planning to shift the complete burden of LNG import onto the industries.

According to a Petrobangla estimation, there could be a deficit of Tk 1.62 billion due to importing LNG in the ongoing 2024-25 fiscal year. The import price per unit was Tk 75.72 between July and September 2024. Of the price, Tk 63.58 was the import cost and the remaining amount was spent on paying duties, tax and operations cost.

Speaking to Prothom Alo about Petrobangla’s proposal, BERC chairman Jalal Ahmed said the proposal has been submitted to the commission. It will be assessed on Tuesday. Then the plan of action will be finalised as per the commission’s board meeting.

In general, any price hike proposal is raised at the board meeting. If it takes the proposal into cognisance, the board forms a technical committee, which will send a proposal to the commission after its assessment. Then a mass hearing will be held with all the stakeholders based on the two proposals. Then the commission will announce its decision.

The commission, however, can reject the proposal at the initial level assessing its rationality.

Petrobangla sent a letter to the Energy and Mineral Resources Division informing it about the gas crisis, import of LNG and financial deficit and other situations. Following this, the energy division approved the gas price hike in principle on 27 December.

Later, Petrobangla on 29 December sent letters to all the distribution companies seeking some specific information. It submitted the proposal formally to BERC with all the information on Monday.

An analysis of the Petrobangla proposal shows the new industries will face more hurdles. Besides, the readymade garment and knitwear factories, and import industries will be affected if the proposal is implemented. At the same time, gas is used in some other factories like bakeries and other products. The price of those goods will also be increased.

Speaking to Prothom Alo, Bangladesh Knitwear Manufacturers & Exporters Association (BKMEA) president Mohammad Hatem pointed out that the supply of gas did not escalate even though the price was raised earlier.

He expressed that this price hike will discourage industrialisation. There will neither be new investment in the industries nor foreign investment.

Earlier, the price for industrial use of gas was hiked three times at an executive order on 18 January 2023. The per unit gas price was set for both heavy and light industries at Tk 30 from Tk 11.98 and Tk 10.78 respectively. The price for captive power plants also hiked to Tk 30 from Tk 16. Later, in February last year, the gas price for captive power plants was set at Tk 30.75.

The Petrobangla proposal also highlighted a picture of the gas crisis. It said the current approved everyday load is 5.35 billion cubit feet. Against this, though the demand is 3.8-4 billion cubic feet, the supply is 2.8-3 billion cubic feet everyday. That means, the everyday deficit is 1.1.2 billion cubic feet.

Though the supply was 2.49 cubic feet everyday during the 2023-24 fiscal year. as nearly 75 per cent of this supply comes from domestic sources while 25 per cent comes from imported LNG.

Petrobangla claimed that they have taken various steps to increase the domestic production of gas and raise imports of LNG.

However, the experts said the supply will not increase even if the price is hiked. The domestic production is gradually declining and there is no scope to scale this up soon. The highest capacity of import from LNG is 1.1 billion cubic feet. There is no scope of raising the import of LNG without setting up new terminals.

They further said there is not much chance of opening any new LNG terminal in the next two years. At the same time, no agreement has been signed to construct any terminal. The interim government has cancelled an agreement signed during the Awami League regime.

Speaking about this, special assistant on energy affairs to the chief adviser of a former caretaker government, M Tamim, told Prothom Alo that the proposed price will be too steep for the industrial sector.

He remarked that the government does not have any scope to make profits from gas if it wants to help sustain export oriented industries in competition.

Pointing out that this step would increase prices of products from local gas-fired factories, he said the duty on LNG import could be withdrawn.

Surely the BERC would assess the rationality of this proposal, he hoped.

* The report, originally published in the print edition of Prothom Alo, has been rewritten in English by Shameem Reza