The latest hike in gas prices will severely affect production in different industries and will subsequently deliver a blow to the country’s grip over exports.
Industry insiders fear that they will lag behind their global competitors because of the new tariff.
The textile mills, which use captive power, will be the biggest sufferer.
The government has hiked the gas tariff by 37.89 percent for the industries and 43.97 percent for captive power plants.
The production cost in apparel sector is going to go up by 1 to 1.5 percent as per kilogram yarn and fabric production will see 4 to 5 percent rise in cost.
“As all the factories are totally dependent on captive power, production costs will become very high”, Mohammad Ali Khokan, president of Bangladesh Textile Mills Association (BTMA), told The Business Standard in his immediate reaction.
“No textile mills in Bangladesh can survive in the competitive global market because of this excessive hike. The factories, set up with bank loans, will become defaulters,” the BTMA president said.
Against this backdrop, the business leader demanded that the government increase gas price by 10 percent each year, instead of this sudden increase of 44 percent.
Gas price increase will put a serious pressure on the readymade garments (RMG) industry, Rubana Huq, president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA), told this correspondent.
“The total RMG production cost will go up by more than one percent. In case of small factories, the cost will rise by more than 1.5 percent,” Rubana said.
As a result, the RMG factories will lag much behind global competitors, she said, adding: “If the production cost even rises by 0.5 percent, many factories will not be able to take any orders.”
Rubana apprehends that some factories may compromise with quality to adjust production costs.
“Since the start of LNG import, businessmen were ready for gas price rise, but not for such a big hike,” Mohammad Hatem, vice-president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard.
It will seriously hamper investment, he said, adding that many RMG factories may face closure, he added.
“The business community has been facing hard competition in the international market for long. This decision will put the RMG and local entrepreneurs under more pressure,” said Dhaka Chamber of Commerce and Industries (DCCI) president Osama Taseer.
The DCCI president said they believe that taking into consideration the sufferings of ordinary people, the government will reconsider the decision.
Bangladesh Energy Regulatory Commission (BERC) on Sunday re-set the gas price in different sectors to adjust for increasing expenses of the government caused by LNG imports.