Petrobangla's gas price hike proposal sparks industrial concerns

A proposed significant hike in gas prices has ignited widespread concerns among industrialists, who fear that the move could cripple the country's economy. 

The proposal, put forward by state-owned gas company Petrobangla, was met with strong opposition from various industrial bodies during a discussion on the gas price hike proposal held in the capital yesterday.

If implemented, the gas price increase could lead to widespread factory closures, job losses, and a decline in industrial output, industry owners said. They warned that such a move would be detrimental to the country's economic growth and could even lead to social unrest.

"This move will impact industrial growth," said Kutubuddin Ahmed, chairman of Envoy Textiles. "It will affect the industry's competitiveness, especially if anyone wants to increase capacity or set up a new unit."

He stated that no other nation in the world runs its industries solely on self-generated power, except Bangladesh.

Team Group Managing Director Abdullah Hil Rakib said, "If the government further increases power prices by any amount, it will be a suicidal move for the industries."

He added that power prices are already creating hurdles for most industries, as the previous government increased them without proper justification.

"The cost of production has increased by 50% due to rising labour costs and fuel prices, while buyers have not adjusted the prices of clothing. Unable to sustain operations under these conditions, many factories have closed in recent months, leading to dissatisfaction among workers in several factories," said Rakib, who is also former senior vice president of the BGMEA.

Criticising the gas price hike proposal, the Team Group managing director said, "If the price of gas is increased again, it will not only adversely impact the industry but also further diminish the purchasing power of the common people. Such a policy makes it impossible to achieve development for either the general population or the industry."

Shawkat Aziz Russel, president of the Bangladesh Textile Mills Association (BTMA), said, "We had hoped that after the interim government came to power, the chaos in the energy sector would subside and gas prices would gradually be reduced. 

"However, through the media, we have learned that Petrobangla has proposed an increase in gas prices. I do not believe it has been reviewed whether this proposed price hike was discussed with anyone or whether the industry can bear the burden of this increase."

He further said, "If gas prices are increased, the industry will be destroyed. Perhaps, at some point, there will be plenty of gas, but there will be no industry to use it." 

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, "It is unclear on what basis Petrobangla has proposed an increase in gas prices. Has the price of gas risen in the international market?"

Stating that this type of proposal is anti-industrialisation, he said the proposal mentions that new connections would require purchasing gas at higher prices. 

"As a result of this decision, new entrepreneurs will lose interest in setting up industries, while those who have already established industries will struggle to compete with the older ones under unfair conditions and may ultimately be forced to shut down," Hatem said.

Tapan Sengupta, deputy managing director of BSRM, told TBS, "In the steel production process, 7-8% of the process cost, from raw material to finished goods, is spent on gas. If this cost is increased, it will affect production costs and, consequently, the price of the products."

He said the government should adjust the costs of both domestic sources and imports before increasing prices. "On one hand, it is providing subsidies, but on the other, it is receiving taxes from the industries."

Petrobangla's proposal

Petrobangla on Monday submitted a proposal to the Bangladesh Energy Regulatory Commission (BERC) to revise gas prices for industrial and captive power users.

If the BERC accepts the proposal, industrials and captive power users — which refers to self-generated, gas-fired electricity within industries — would have to pay Tk75.72 per cubic meter for their gas use beyond the sanctioned load. At present, they pay a flat Tk30.75 per cubic meter even if they breach their sanctioned load.

However, new industrial and captive connections will have to pay Tk75.72 per cubic meter throughout.

Those who got the primary approval for new connections will have to pay 50% of their bills of sanctioned load at the existing rate and the rest at the new rate.

Under the proposed policy, the gas price will be determined by the cost of LNG imports calculated on the average expenditure of the previous three months' total costs — including operational, transmission and distribution charges — as well as contributions to gas development, energy security and research funds. A 15 % VAT would be imposed too.

Between July and September 2024, Petrobangla imported 1,726 million cubic meters of LNG for Tk10,979 crore. The per cubic meter cost of LNG during that period was Tk63.58, and after including all additional charges, the final cost per unit reached Tk75.72.