Titas Gas tastes losses for the first time in history

Titas Gas Transmission and Distribution Company – a publicly listed state-owned gas distributor – incurred a loss, to the tune of Tk117 crore, for the first time in its history in the January to March quarter of the ongoing fiscal year 2022-23. 

Before that, the company, which enjoys a monopoly in pipeline gas distribution in Dhaka and Mymensingh since its establishment in 1964, had been making decent profits. 

What dragged Titas to losses

Titas Gas officials mainly have two factors to blame – the energy regulator's nearly halving of the company's gas distribution margin and system loss from the gas usage of household retailers. 

In June last year, the Bangladesh Energy Regulatory Commission (BERC) curtailed the gas distribution margin, which is simply the selling price of gas minus the purchase price, for Titas to Tk0.13 per cubic metre from Tk0.25. 

After this regulatory step, the company's net profit in the nine-month period from July to March of FY23 stood at Tk7.49 crore, which is a staggering 96% decline compared to the same period a year ago.

Since the distribution margin reduction, Titas Gas's profitability saw a drop and finally, the company fell into losses in the latest quarter. 

An official, who works at Titas Gas's finance department, said seeking anonymity, "If this situation continues, a good fundamental and regular dividend payer like Titas Gas will turn into a sick firm in the long run, and will not be able to pay dividends in the future."

"Titas Gas has requested the concerned authorities several times to reconsider the distribution margin reduction but no one is paying any heed," he added. 

The other culprit behind Titas Gas's March quarter loss is the system loss from the gas usage of household retailers. 

Until December last year, Berc was entitled to fix the gas prices for consumers that include charges like production, distribution, transmission, liquefied natural gas (LNG), gas development fund, energy security fund, and value-added tax (VAT). 

For households, the per cubic metre gas price was fixed at Tk18 in last year's tariff. Of the amount, Tk2.21 was production charge, Tk11.89 LNG charge, Tk0.52 for the gas development fund, Tk0.03 for the Berc research fund, Tk0.53 for the energy security fund, Tk0.47 was transmission charge, Tk2.20 VAT and finally, Titas Gas was left with only the distribution charge of Tk0.13.

The regulator's step only reduced the distribution charge. Charges for all the other components stayed the same.

On 2 May this year, Titas Gas wrote to Berc requesting it to redetermine the monthly gas consumption of unmetered single and double burners.

The letter mentioned that currently, the gas consumption in unmetered one-way stoves is 73.41 cubic metres, and that in unmetered two-way stoves is 77.38 cubic metres. 

But during the new price determination in June last year, the gas consumption was considered to be 55 cubic metres for single and 60 cubic metres for double burners – way less than the current consumption. 

As a result, this system loss was reflected in Titas Gas's financial statements and the firm turned a quarterly loss. 

Hence, Titas Gas wrote to Berc to consider 76.65 cubic metres of gas consumption for single burners, and 88.44 cubic metres for the two-way ones until metered gas consumption of unmetered residential customers is confirmed. 

Financials

According to the unaudited reports of Titas Gas, the company's gross profit in the July to March period of FY23 dropped 46% year-on-year to Tk273 crore, despite a 26% growth in revenue over the same period. 

During the January to March period, the company's cost of sales exceeded its revenue, which led the company to a negative gross profit figure of Tk31.03 crore. In the same quarter of FY22, its gross profit was Tk167 crore.

According to Titas officials, revenue increased thanks to the price hike of gas in recent times. 

In the March quarter of FY22, the company's cost of sales was 96% of its revenue, which stood at 100.42% in the same period of FY23. 

Titas Gas was listed on the Dhaka and Chattogram bourses in 2008 under direct listing by offloading 25% of shares in the stock market. Currently, Petrobangla holds 75% of the company's shares. 

Titas Gas transmits natural gas from the gas fields to different areas for power, fertiliser, industrial, commercial, captive power, feed gas for CNG, and domestic consumers.

At present, it has a gas pipeline network of about 13,320.39 km and a total connection of gas customers is 28,77,604 km including eight power stations of Bangladesh Power Development Board, 39 private power stations, and three fertiliser factories in the bulk category.