The Financial Express

Bracing for another gas price hike  

Shahiduzzaman Khan   | Published: March 16, 2019 22:08:51

Bracing for another gas price hike   

Another hike in the country's gas price is in the offing. If implemented, this will be the seventh increase in the last 10 years. The Bangladesh Energy Regulatory Commission (BERC) has taken the initiative to raise gas price again in the face of stiff opposition from all sections of the people.

In its previous hike in February 23, 2017, the BERC had raised natural gas tariff by 22.70 per cent for all types of consumers that became effective in two phases.

The energy regulator announced a four-day public hearing from March 11 to justify gas tariff hike proposal for all types of consumers, including households, to nearly double the average tariff to Tk 12.19 per cubic metre from Tk 7.35.

Unlike the previous proposals, they sought to raise tariff for household single and double burners to Tk 1,000 and Tk 1200 per month respectively from existing Tk 750 and Tk 800 per month respectively. New gas tariff for metered household consumers has been proposed at Tk 13.65 per cubic meter from existing Tk 9.10 per cubic meter. The feed gas in the compressed natural gas (CNG) for filling stations has been proposed to be raised by 25 per cent to Tk 40 per cubic metre from the existing Tk 32.

All the gas companies sought to raise tariff for gas-fired power plants to Tk 7.66 per cubic metre from the existing Tk 3.16, representing a 142 per cent hike. For fertiliser factories they proposed to increase the tariff by 158 per cent to Tk 7.0 per cubic metre from the existing Tk 2.17.

For gas-fired captive power plants, the proposed tariff is Tk 15.70 per cubic metre from the existing Tk 9.62, representing a 63 per cent hike. For the industrial sector, the natural gas tariff as sought by the distributors is 93 per cent higher at Tk 15 per cubic metre from the existing Tk 7.76. The government claims natural gas tariff has been proposed to cope with the increased import costs of importing LNG, which is expected to double by April next.

The BERC had, in fact, turned down the previous proposals of Petrobangla and its subsidiary companies on October 16, 2018 keeping the natural gas tariff unchanged, as the volume of LNG import was less than expected. They had sought a hike in natural gas tariff, calculating import of LNG to the tune of 1,000 million cubic feet per day (mmcfd) then. But re-gasified LNG (RLNG) supply was then hovering around 300 mmcfd.

Currently, the volume of RLNG supply from the country's maiden LNG import terminal -- FSRU (floating, storage, re-gasification unit) -- has increased to around 500 mmcfd. LNG import is expected to double from April, as the country's second FSRU is expected to be commissioned in early April.

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 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.

The government took the initiative of raising gas price before the 11th parliamentary elections, held on 30 December 2018. But it did not go for that fearing people's negative reaction before the national elections. Now two months after the election, BERC has once again taken such an initiative to increase the gas price.

There is no denying that the increased gas prices will hit the export-oriented industry sector hard as it might face stiff competition in the international market due to higher production costs.

Companies that cater to the local market will also face difficulties. Foreign products might take over the local market if production costs of local products go up, as is the case of local textile factories.

The Bangladesh Textile Mills Association (BTMA) fears that not a single local yarn factory would be able to face the challenge if 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  gas price is increased as per the proposed rate, the cost will be around Tk 23.80.

Analysts say the latest proposal to hike gas prices can't be justified. Implementation of this proposal will disrupt the transport sector. The 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. These steps push up their transmission cost.

The gas price hike will affect the price of edible oil and sugar too. Overall, it is destined to affect people's livelihood, which will increase the inflation rate. The hike will affect the prices of power, production of goods and other sectors. Businessmen will raise the price of goods and services. As a result, people will have to pay more for everything.

The proposed hike, if implemented, will invariably lead to a rise in transport cost, electricity tariff and prices of other consumer goods as well. The people will have to bear the burden of the gas price hike in every sphere of their lives.



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