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Nation braces for biggest ever gas price hike  

Shahiduzzaman Khan   | Published: June 22, 2019 22:04:27


The Bangladesh Energy Regulatory Commission (BERC) is set to announce the highest ever hike in natural gas tariff next week. The state-run Petrobangla and its allied gas marketing and distribution companies proposed raising gas tariff for household consumers by 80 per cent and for consumers of different sectors including power, industry, and commercial clients by up to 211 per cent.

The BVERC held public hearings over the tariff hike proposals in March this year where consumer rights groups, businessmen and left-leaning political organisations protested the tariff hike proposals and sought rooting out corruption, theft and gas pilferage to ensure efficient operations of gas companies.

Over the past one decade, the gas companies asked for raising natural gas tariff at the consumer's end four times, but the Commission raised tariff thrice. Back in 2009, the gas companies had sought a hike of 65 per cent on an average at consumer ends, but the BERC raised the tariff by 11 per cent. After six years, the agencies had sought hiking tariff by 40.79 per cent at the end users' level, but the Commission upped it by 26 per cent. Again in 2017, the gas companies had sought a 95 per cent spike, but the regulator raised the tariff by 11 per cent. Last year the agencies proposed a 75 per cent hike, but  BERC did not raise tariff for the retail consumers.

The Commission has apparently taken into cognisance Petrobangla's losses or expenses owing to the import of 'expensive' LNG (liquefied natural gas) from the international market. Currently, Petrobangla counts a monthly loss of Tk 20 billion for importing LNG from international market and selling the fuel at current prices in the local market.

In their latest proposals, the gas companies wanted consumers to pay Tk 1,350 per month for a single-burner stove instead of the existing Tk 750, while a two-burner stove user would have to pay Tk 1,440 per month instead of Tk 800.

The metred household consumers would have to pay Tk 16.41 per cubic metre (one unit) instead of Tk 9.10. The companies also wished the power plants pay Tk 9.74 per unit of gas instead of the existing Tk 3.16, meaning a 208 per cent hike.

Besides, the fertiliser factories would have to pay Tk 8.44 per unit instead of Tk 2.71 with a hike by 211 per cent. For the captive power plants, they proposed increasing gas tariff by 96 per cent to Tk 18.88 per unit from Tk 9.62. For industries, the gas marketing and distribution companies proposed hiking gas tariff by 132 per cent to Tk 18.04 per unit.

The National Board of Revenue (NBR), meanwhile, waived supplementary duty (SD) and customs duty (CD) at consumers' end and also lowered advance income tax (AIT) to help Petrobangla as well as the users. It waived a total of 122 per cent tax on the locally-produced natural gas at consumers' end to keep the blended gas price rational. Yet it slapped 15 per cent value added tax (VAT) on imported LNG.

Reacting to such a hike plan, the Bangladesh Textile Mills Association (BTMA) fears that not a single local yarn factory will be able to face the challenge if the gas price is increased as per the proposed rate. At present, it pays Tk 11.76 as gas price to produce 1.0 kg yarn. If the gas price is increased as per the proposed rate, the cost will be around Tk 23.80. The textile mills are already facing stiff challenge from international yarn factories even at the current rate.

The consumers might face added pressure in the future as gas price will increase and dollar price is also on the rise. The pressure of tax will be added to that if the new VAT law is implemented.

Analysts say the latest proposal to hike gas prices will affect many sectors including the transport sector. The Consumers Association of Bangladesh (CAB) filed a writ with the High Court early this year challenging the BERC decision to increase gas price.

Defending the price hike proposal, the gas companies claim that they have undertaken a number of gas transmission projects to facilitate the supply of imported LNG (liquefied natural gas). Besides, the companies need to borrow a huge amount of money from foreign sources to implement such projects.

Hike in gas price will obviously affect the price of edible oil and sugar. The hike will affect the prices of power, production of goods and other sectors. The businessmen will increase the price of goods and services. As a result people will have to pay more prices for everything.

There is no denying that gas price hike will leave a far-reaching negative impact on businesses as such a move will raise the cost of doing business. The cost of transportation, production and electricity as well as overall food prices will increase with the gas price hike, said a leading chamber -- the Metropolitan Chamber of Commerce and Industry (MCCI).

Without depending much on gas, the government and the people need to think of alternative energy. It is not feasible to deal with the challenges of a gas crisis only by increasing gas prices. The crisis can be eased to some extent by fixing the problems by introducing metre-based billing system, stopping illegal gas connections and reducing illegal gas bills. Some irregularities have recently surfaced over meter-based billing. Some subscribers have complained about billing system as faulty.

Meantime, the Power Development Board (PDB) has already floated its plan to raise power price very soon. The Dhaka Water and Sewage Authority (WASA), on the other hand, has increased water price. All these are supposed to put extra burden on the ordinary citizens. 

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