Amid oil shock, 100% gas price hike in the making

Infographic: TBS

State-owned liquefied natural gas distributors have proposed raising retail rates by up to around 100%, according to top officials at the energy price regulator.

The spiked prices may mount up pressure on people further who have already been struggling to cope up with recent diesel price hikes. Besides, industries that burn gas in their production units would face a bump in their pandemic recovery patch.

But the gas companies say their price hike move is to adjust with the inflated importing rates, plus to calibrate the government power subsidy and spending gap.

If the proposal is accepted, consumers will have to pay Tk19-20 per cubic metre of gas, while the current rate is Tk9.80, according to sources at the Bangladesh Energy Regulatory Commission (BERC).

They said the gas distribution companies – Petrobangla and its subsidiaries – submitted the proposals to the BERC last week, while the Bangladesh Petroleum Exploration and Production Company (Bapex) wants to increase its production cost by more than 48%.

"We have received applications from Petrobangla and some distribution companies. But we have not received such proposals from any producer," Md Maqbul-E-Elahi Chowdhury, member (Gas) at BERC, told The Business Standard.

But a Bapex source confirmed to The Business Standard about the company's 48% production cost hike proposal.

Apart from raising the retail price, a Titas Gas official said they have also demanded doubling the distribution charge. At present, Titas gets Tk0.25 for supplying per cubic metre of gas to the consumers, but it demanded to increase the margin at Tk0.50.

At present, Bapex gets Tk3.04 for producing per cubic foot of gas.

With the instruction of the Energy and Mineral Resources Division of the Ministry of Power Energy and Mineral Resources, the gas production and distribution companies have marched for the price hike, according to Petrobangla sources.

Currently, Petrobangla imports per million British thermal unit (MMBTu) of liquefied natural gas at $11.5 under a long-term contract with foreign suppliers.

To meet the local demand, the government also purchases gas from the international spot market. A supercharged international demand following economies reopening last year, Bangladesh imported LNG at $36 per MMBtu from the spot market in October 2021 and got price quotes as high as $51 from a supplier.

Due to the pricier imports and sales at a lower rate to domestic consumers, the government faces a huge price gap and more dependency on power subsidies.

The Energy and Mineral Resources Division recently said some Tk70,000 crore would be needed this year to provide subsidies in gas, electricity and fertiliser.

But the Finance Division kept aside only Tk12,000 crore in the current fiscal year for the purpose.

A Petrobangla official said the state-owned entity faces a Tk17,000 crore gap in gas import, which could be minimised if the authorities allowed them to pass through the duties and taxes.

The last gas tariff was announced in July 2019, when the BERC increased the bulk gas price by 32.8% to Tk9.80 per cubic foot from Tk7.38.

One more headwind for industries

Already grappled with an international supply chain disruption and raw material hikes, industries say pricier gas would jeopardise their pandemic recovery.

"Bangladeshi businesses will lose their competitiveness in the international market if gas prices are doubled," Mohammed Amirul Haque, managing director of Premier Cement, told The Business Standard.

The cement-maker said they are facing Covid-led production delays, unusual rises in raw materials and production cost.

"If the price of gas doubles, the negative impact on business would double as well," he commented.

According to Aameir Alihussain, managing director of the country's largest steel-maker BSRM, doubling the gas price will not be encouraging to local entrepreneurs in overcoming the pandemic fallout.

"It is ideal not to increase the gas price during the pandemic. If there are no options left, the government could have raised the price gradually. But increasing the rates at one go is not reasonable," he commented.

"How would we do business if such pressures keep coming from all corners," he questioned.