LNG import to increase energy subsidy by 230pc

The subsidies are expected to make a quantum leap this fiscal year, driven by the imports of liquefied natural gas (LNG), officials at the finance division told the FE on Thursday.

This is a new head for subsidies as Bangladesh is importing this alternative fuel to combat gas crisis, especially in the Chattogram region.

The maiden floating storage and re-gasification unit or FSRU carried 133,000 cubic metres of LNG from Qatar in April.

Its commissioning has not started yet, though all necessary preparations had been made by Chattogram-based gas distributing company, said Khaiz Ahmed Mozumder, chief executive at the Karnaphuli Gas Distribution Company.

In the meantime, the government has devised a plan to raise its subsidy outlay by 232 per cent to Tk 196 billion for non-financial institutions, including the Petrobangla.

The Bangladesh Petroleum Corporation (BPC), the sole importer of petroleum products, will also be involved in importing LNG.

"The fuel-related forecast in recent times has forced us to come up with the latest review of extra allocations for subsidies," an official familiar with the matter at the ministry of finance told the FE.

"Look, we had allocated Tk 25 billion to Petrobangla in the just-concluded fiscal year, but this year it may go up to Tk 50 billion on account of the LNG imports," he said.

"We're expecting Petrobangla to require between Tk 20 and Tk 30 billion as subsidies only for the import of LNG this fiscal year," he said.

LNG demand is seasonal and typically peaks during winter season in colder northern Asian markets.

Its demand wanes during the spring season months before picking up again during the summer when consumers use air conditioning, people familiar with the matter told the FE.

"The LNG prices fluctuate and for this reason we cannot predict accurately the actual subsidy needs for Petrobangla," the official said.

The LNG is being imported to meet the demand for the greater Chattogram region, where industries and households have been facing acute gas crisis for a long.

Mahbubul Alam, president of the Chittagong Chamber of Commerce and Industry, said the city is getting a supply of gas of 250mmcfd against the demand for 450-500mmcfd.

He said most of the factories are not running at full capacity due to the lack of gas.

The official, however, said the government may fund the petroleum corporation this year as the oil prices are also on the rise.

The government did not provide any subsidies even in the just-concluded fiscal year (2017-18).

"We believe that the BPC will need subsidies this year as fuel prices may rise further," he said.

Earlier, the finance ministry had not distinguished between the subsidies and loans while funding the state-owned enterprises.

This year there is no definitional error leading to the rise in higher allocations for subsidies, the ministry of finance officials said.

From this year, the division has redefined the subsidies, which is another reason for the significant rise in such payouts.

There was a tussle between the finance division and the BPC over the repayment of money following a definitional error.

[email protected]