Tall orders from RMG sector

RMG exporters have demanded a few things from the government, some of which are essential for production. First in the line of demands is the uninterrupted supply of natural gas at nearly half the current price. The rationale put forward is that global fossil fuel prices have fallen. The curtailing of Bangladesh Energy Regulatory Commission's (BERC) powers has allowed the State to steeply increase the price of electricity and realign fossil fuel prices as per liking of energy planners. So, when RMG demands gas rate to be revised from Tk30 per unit to Tk16 per unit, in all probability, this will not fly. Certainly, some middle ground will have to be found because obviously the State cannot afford the RMG sector to go kaput. This brings us back to the question of fossil-fuel supply.

Reportedly, the government is in the process of making operational yet another floating storage and regasification unit (FSRU) with a foreign company that will raise Bangladesh's capacity to significantly increase import of liquefied natural gas (LNG). Under normal economic circumstances, perhaps the costs of higher volume of LNG supply could have been defrayed. These are hardly normal times for the economy. The inclination remains import-dependent unfortunately. While there have been some reports in the media that the government is mulling over greater coal extraction from existing Dighipara coal field, one wonders if it will ever dawn upon energy planners that the country is out of time? The coal policy should have been finalised long ago, but that didn't happen. If the country can have an Indemnity Act for the supply of electricity from private sector power plants, surely the State can get a move on extraction of coal from proven domestic reserves with another Act that will expedite coal exploration on a war footing?

The dearth of dollar is not simply because of falling orders or fall in remittances. As reported in the media, the Economics Relations Division (ERD) has come up with worrying news where the government is facing a probable decline of "a $1.5 billion decline in net financing from external sources next fiscal year and $2.0 billion the following year." This is directly correlated to how much the government can spend with enough negative impact to complicate fund allocation. Then there is the question of external debt financing. ERD data estimate that the country will have to pay more than $3.5 billion (principal + interest) in the current fiscal, which will exceed $4.0 billion in the next fiscal. The cumulative effect of all these payments is less money for fossil fuel import.

The government during its first term did what had to be done to provide electricity to an energy-starved economy. That time is upon us again. The economy is tottering due to a lack of fossil fuel supply. The RMG sector's potential output is down 50 per cent because current energy prices have become uneconomic. When one takes into account that the cost of sourcing raw materials has increased significantly due to the rise in value of the US$, it becomes clearer why apparel exporters are asking for the assurances from the government. It is not just RMG that is suffering. About 16 per cent of export comes from other sectors which are also in dire straits due to intermittent supply of both power and gas supply.

The economy imports about $67 billion worth of goods and services annually. Its exports are worth about $54 billion. That gap needs to be narrowed via industries that are able to export more goods. As things stand now, RMG remains the best hope for closing the gap with greater production (leading to greater exports). Again, the government can ill-afford to supply fuel and power only to industry while keeping the rest of the country in the dark, especially after touting 100 per cent electrification in the country. No government in its right mind will do that in election year. Things are bound to get more and more complicated with the authorities' inaction regarding diversification of primary fuel supply and continuing the "go slow" policy on greater domestic exploration of primary fuels.

This is reflected on both coal and natural gas issues, which have seen no serious development in more than a decade. Why? How much more pain can the economy endure before something changes at policy level? What other evidence does the State require to understand that industry needs power and energy supplies at a price that makes economic and business sense? Despite having more than enough studies and surveys at its disposal on coal deposits and probable gas fields, the State keeps promising the sun and the moon to people, to industry that good days are not far away. Those good days will forever be a pipedream for Bangladesh, its people and the industry as a whole if exploration does not start in earnest from today. The country has a number of coal-fired power plants waiting to be commissioned but can't be because there is no money for importing coal. Policymakers need to stop making excuses and start delivering on domestic coal (and start drilling exploratory gas wells onshore) while there is still time to salvage the situation. It is not only domestic industry that is watching, prospective foreign investors also are.

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