Industries of the country have urged the government to provide cash incentives and reduce various taxes so that they can recoup losses from the recently announced hikes in gas tariffs.
They also recommended fixing system loss issues, stopping illegal gas line connections, as well as meter-reading-related theft.
The government on January 18 hiked gas prices by up to 179% to adjust subsidies and reduce the fiscal deficit. The new rates will be effective from February 1.
The gas price for power, IPP and rental power generation plants was increased to TK14 per cubic metre from the existing Tk5.02, while prices were hiked to Tk 30 from Tk16 for captive power plants, small power plants and commercial power plants.
The price of gas used by large, medium, small, cottage and other industries was hiked from Tk11.98, Tk11.78, and Tk10.78, respectively, to Tk30 for all.
Apart from this, the price of gas used in hotels, restaurants and other commercial areas hiked by Tk3.86 to Tk30.5 from the existing Tk26.64.
Recently, the government granted itself the power to fix prices without a public hearing by amending the BERC Ordinance. The government increased the price of electricity on January 12 after assuming responsibility.
No assurance of uninterrupted supply
Talking to Dhaka Tribune, Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that the price has been hiked to such an extent that the production cost will surely increase.
“We haven't received any assurance on uninterrupted supply of gas though authorities said they will ensure supply,” he added.
Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), also told Dhaka Tribune that they still have not received assurances of uninterrupted supply of gas despite the abrupt hike in gas prices.
“The increase in gas prices will reduce the competitiveness of the country's factories. The supply pressure of gas has been low in our industry for a long time, further hike in the tariff is like a double whammy,” he added.
BGMEA Vice President Shahidullah Azim said assurances of uninterrupted gas supply are badly needed.
He also said that factories are already struggling due to the ongoing global economic crisis, so this was not the right time to hike gas prices.
“Most factories are running at 60%-70% capacity due to low gas pressure and low orders. In this situation, the production in the factory will naturally decrease with increased gas prices,” he added.
Is the government ready for uninterrupted gas supply?
A senior official of the Bangladesh Energy Regulatory Commission (BERC) said that the government has increased the gas price out of necessity.
The main reason for the successive increase in the price of gas and electricity is the adjustment of government subsidies, the official added.
The government has taken the decision after holding discussions with businessmen and has also assured of uninterrupted gas supply in return. The businesses have also agreed to pay increased prices to an extent.
Asked how prepared the government was to ensure uninterrupted gas supply, he said that if they consider the price of gas in global market, the problem will remain.
“I think now the government will import LNG and later, if LNG is mixed with local gas and given to business establishments or industrial factories, it will be possible to solve this problem to some extent,” he added.
Imperiled industries hunt for solutions
Speaking to Dhaka Tribune, Anwar Ul Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said he understands that the government had no option but to increase the gas price, but the hike should have been kept to a tolerable.
“A price of Tk20 per cubic metre should have been enough. To ensure the survival of industries, the government should reduce taxes. Corporate tax in various industries should be reduced by at least 5% from the existing rate, and source at tax should be abolished, or at least reduced from 1% to 0.5%,” he added.
Moreover, the dollar rate for exporters should be increased from Tk102 to Tk107 per US dollar.
Requesting anonymity, a director of the BTMA said that government should give cash incentives for the next five years so that the industries can sustain themselves and adjust to the new gas rates.
He added that there are different types of taxes, which can be reduced significantly.
“Instead of increasing the gas tariff suddenly like this, a long-term roadmap should be prepared with all stakeholders. The abrupt hike in gas price leaves the industry in a whirlwind, where there is no opportunity to negotiate with buyers about prices,” he added.
Stopping system loss is a must
BCI President Anwar Ul Alam Chowdhury said that the BPC should take initiatives to reduce losses in various ways.
Faruque Hassan said that they long demanded to stop system losses.
“Due to system losses, connection problems, theft through metre reading, and illegal connections, the government is losing a lot of revenue,” he added.
Echoing Faruque Hassan, Shahidullah Azim also urged to stop system loss, leakage issues, and other problems.
Regarding the impact of the price hike, Shamsul Alam, energy advisor to the Consumers Association of Bangladesh (CAB), said the greatest impact would be on the general public.
“The Government has increased the price of gas three times with the assurance of uninterrupted gas supply. But there was never any significant change in the situation,” he added.
Now the price has been increased again, as a result of which the cost of production will increase, and the price of products will also increase, he added.
Gas price hike explanation
According to the explanation from the Department of Energy and Mineral Resources, there is instability in the prices of all types of fuel worldwide due to the current global economic situation and the Russia-Ukraine war. As a result, insurance costs, risk costs, bank interest, and other energy-related expenses, including currency weakness against the US dollar, have increased.
The import price of liquefied natural gas (LNG) in the world market has also increased abnormally, so the government had to pay a considerable amount of money for subsidies in this sector.
The government explanation also said that the opinions of all stakeholders had been considered before hiking the prices. Since the increased demand for gas has to be met by importing LNG at higher prices from the spot market, the government has decided to increase the price of gas used in power, industrial, captive power and commercial sectors.