Now time for gas tariff rise
The government’s decision to phase out energy subsidies leads to the hike, causing financial burden on the consumers
On the heels of a power price hike just a few days ago, retail gas prices may also go up by around 17% this week, according to Energy and Mineral Resources Division sources, inflicting fresh inflationary pain to consumers.
Gas distributors, including Titas, have recently written to the Ministry of Power, Energy and Mineral Resources, seeking adjustment of tariff and distribution charge.
Energy industry insiders said the industrial sector, power generation and captive power plants will be hit the hardest with the new gas hike.
Industries now pay Tk11.78 and small-scale captive power units pay Tk16 per cubic metre of gas that may jump up to Tk24, show price adjustment proposals by gas distributors.
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As per the proposed tariffs, the use of a single burner will cost around Tk168 more at Tk1,158 and a double-burner around Tk183 more at Tk1,263 per month.
Energy officials said the tariff adjustment, roughly after eight months of the last hike, will substantially lessen the government's Tk6,000 crore energy subsidy in FY23. But experts labelled the move "unreasonable" and "crippling" to the entire energy sector.
Though the previous 23% gas price hike in June 2022 was announced by the Bangladesh Energy regulatory commission (BERC) following a public hearing, the swift price adjustments this time are likely to be by an executive order.
In the last 14 years, gas prices have increased by 174.42%.
The Business Standard approached SM Zakir Hossain, additional secretary (Operation) of the Energy and Mineral Resources Division, for comment. But he neither discarded any potential tariff hike nor made any statement.
Mixed reactions among entrepreneurs
Industrialists are divided over a potential gas tariff hike, with some claiming that it could harm Bangladesh's business competitiveness.
While some are willing to pay more for uninterrupted gas supply, others argue that the industry will not survive if prices are raised without also addressing the ongoing gas crunch.
Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said they have recently written to the government and are willing to pay additional rates if the gas supply is uninterrupted.
"But if the current situation does not improve, then the industry will not be able to survive," he told The Business Standard.
Currently, the price of gas used for captive power in industry is Tk16 per cubic metre, and gas used for other purposes is Tk12 per cubic metre.
Mohammad Khorshed Alam, chairman of Little Star Spinning Mills Limited, told The Business Standard, "Some textile items are now being sold at a loss. A year and a half ago, the price of gas was Tk8, now it is Tk16. If it soars to Tk24, industries will not be able to survive."
Referring to a manufacturing calculation, he said currently the gas-electricity costs to produce one kilogram of yarn is 8%. "If it goes up to 16% now, we will lag behind in global business competitiveness."
He cited the example of the cost of gas in Uzbekistan, where it only costs industrialists Tk7 per cubic metre.
Titas seeks four times higher distribution charge
Titas gas, the largest distribution company in Bangladesh, has sought the authorities to increase its distribution charge by a whopping four times, to Tk0.6387 per cubic metre.
According to the company's proposal, the current distribution charge of Tk0.1300 per cubic metre has significantly impacted its cash flow, as 3% of any consumer's gas bill is deposited to the national exchequer as source tax.
The proposal states that before September 2018, the source tax was applied to the weighted average price of gas, but it has now been revised to apply to all consumer bills, which has hurt the company's earnings per unit of gas.
The company's profit before tax was Tk970 crore in the 2014-2015 fiscal year, which has decreased to Tk386 crore in the last fiscal year.
Meanwhile, the source tax contribution to the national exchequer has increased from Tk282.46 crores to Tk442 crore during the period.
Unreasonable
Energy experts have questioned the steep hike in gas prices, with many arguing that it is unjustified and will ultimately harm the energy sector.
Professor Dr Shamsul Alam, energy advisor to the Consumers Association of Bangladesh (CAB), said, "Our studies did not find any reason for such a price hike. With such a decision, the gas and energy sector will become paralysed."
He told The Business Standard that such a policy will increase the cost of power and gas for the people, but it will not be able to reduce rolling blackouts and gas rationing.
