Govt set to hike gas price again despite ongoing crisis

The govt wants to collect extra price from businesses with assurance of smooth supply

A representational image. A liquefied natural gas (LNG) tanker.Reuters file photo

The government has initiated a process of hiking gas price once again defying the ongoing crisis and public woes.

A gazette notification is likely to be issued in this regard within the current week.

According to the power, energy and mineral resources ministry sources, the gas price will be hiked with the assurance of increased supply to the factories.

It requires more money as the authorities are planning to increase the imports of liquified natural gas (LNG) at a high cost.

The government has shifted a large portion of the extra cost to the consumers to lessen the pressure on subsidy. The businesses, however, are willing to pay the increased price.

Earlier, the government had hiked the gas price in two phases with the assurance of increased supply, but the import and supply did not increase as per the assurance.

The fresh initiative to hike the gas price came at a time when the industries are suffering from gas-crisis. Even households are keeping stoves off in some areas due to the gas-crisis.

Two energy division officials, on the condition of anonymity, told Prothom Alo that the gas price would rise for industries, power sector, and businesses this time. It would not be applicable for the transport sector and households for the time being.

The daily demand of gas in the country is now 3.8 billion cubic feet when the average supply is 2.66 billion cubic feet. The gas crisis in the industrial sector will substantially reduce if the authorities ensure the supply up to 3.1 billion cubic feet per day.

The gas crisis has been acute in the country since July when the authorities stopped purchasing gas from the spot market due to the high price. It remained unchanged and the country is now receiving gas under its long-term agreements. The total gas supply still remains lower than before.

Price hike due to crisis

The government started importing gas at the end of 2018, citing a crisis in the country. Currently there is an infrastructural capacity to import 1 billion cubic feet of LNG per day and the government has a plan to boost the capacity further.

In 2019, the authorities declared to import 850 million cubic feet of gas per day and hiked the gas price by a bit more than 32 per cent. But the imports did not reach the declared level.

Later, the Bangladesh Energy Regulatory Commission (BERC) ordered Petrobangla to return the extra price – Tk 90 billion – to the consumers, but the order is yet to be implemented.

Petrobangla, again in 2022, proposed a gas price hike as it was planning to import another 850 million cubic feet of gas per day. The BERC responded to the proposal and raised the gas price by nearly 23 per cent as per an estimated gas import of 680 million cubic feet per day.

Later, Bangladesh stopped purchasing LNG from the spot market in the following month. The LNG supply descended to 380 million cubic feet per day due to the import suspension. The amount now rose to 420 million cubic feet per day.

The energy and mineral resources division held different rounds of meetings with the businessmen who are in trouble due to the low gas supply. They received the same old assurance from the government that the gas can be imported if an additional price is paid.

The businesses had no choice but to grab the proposal as it costs much higher to take electricity from the national grid. They count more than Tk 9 for a unit of electricity from the national grid when it costs a bit less than Tk 4 to generate electricity in their captive power plants using gas. It is the lesser evil for them.

They also demanded an increase in the price of gas supplied to other power plants. They no longer want to bear the liability of subsidies when the power plants receive gas at a lower price.

The major consumers of gas are textile factories. Bangladesh Textile Mills Association (BTMA) president Mohammad Ali told Prothom Alo that the gas price was hiked earlier citing the increased import of LNG, but the import did not rise. The industrial sector is willing to pay a higher price if uninterrupted supply is ensured.

He also demanded that the gas price be hiked for the power plants too. It should not happen that the power plant owners would be billionaires when the industries are destroyed.

Extent of price hike

The authorities are yet to finalise the extent to hike the gas price. But the energy ministry sources said the price may go up by 50 to 100 per cent from sector to sector.

The industry owners are willing to pay up to Tk 25 for a unit of gas. The current price is Tk 16 per unit for the gas supplied to the captive power plants. It will be a 56 per cent jump if the authorities raise the price to Tk 25.

The large industries now pay Tk 11.98 for each unit of gas and it may almost double under the new price chart.

Mohammad Hatim, the executive president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the industry owners are willing to pay higher prices during the crisis subject to uninterrupted supply of gas. The price needs to be adjusted again once it falls in the world market.

Electricity price may rise too

The government and private power plants now buy each unit of gas at Tk 5.2 and it may double in the new price chart. It would push up the power generation cost at the plants and might result in a fresh hike in power tariff.

The government raised the bulk power price by 20 per cent in November. Later in January, it issued an executive order raising the power tariff at retail level by 5 per cent.

Two officials of the Power Development Board (PDB), who wished anonymity, said the PDB has been counting losses even after raising the bulk power price. The government has allocated Tk 170 billion as subsidy to the power sector this year. The sector may see a deficit of Tk 400 billion if it has to buy fuel, including coal and oil at the current price. The deficit would increase if the gas price rises again. Also, the power tariff would go up further.

Petrobangla under pressure

Petrobangla is struggling to meet the gas import bill due to lack of money. It stopped LNG purchase from the spot market last July and did not resume till the date. Gas extraction from the domestic gas fields also declined to a remarkable extent.

Two Petrobangla officials said there is a pressure to increase LNG imports, but it cannot be done due to lack of money. Petrobangla now has a balance in its bank account which covers only half of its total bill in January. An extra amount of Tk 250 billion is required to import 10 LNG cargoes. The import plan would not come true unless it manages an additional amount of money.

'It's cheating'

According to BERC sources, the gas price has been hiked by more than 174 per cent in five phases since 2009, while the CNG price rose in six phases. Individuals concerned said the government has gone to import instead of paying attention to the exploration and extraction of gas inside the country. As a result, the country has to pay the price.

The Consumers Association of Bangladesh (CAB) has long been demanding to reduce the irregularities and wastage in the gas sector and adjust the government subsidy, instead of raising the price.

Its senior vice president Shamsul Alam told Prothom Alo that all consumers, including industries, are suffering from a gas crisis. The government has no moral ground to raise the price again. It is tantamount to extorting the customers as well as fraud at its worst.