PM spells out crisis-management plan:
- Tells energy division to import gas at high rates from spot market
- Sell gas to industries to a higher price to cut losses
- Instructs BB to ensure sufficient dollars to open food import LCs
- Slap more duty on luxury goods
- Take steps to increase remittance
- Control subsidy on energy and power sector
- Continue agriculture and food subsidies
- Borrow more from banking sector
Prime Minister Sheikh Hasina has directed the Energy and Mineral Resources Division to ensure uninterrupted gas supply to industries by importing liquefied natural gas (LNG) from the spot market.
Bangladesh Bank needs to make sufficient dollars available to banks to open letters of credit (LCs) for the private sector to import food and various consumer goods, including wheat, sugar, oil, complementing the government's own food imports, she said at a meeting with senior bureaucrats at Ganabhaban on Sunday.
Reviewing the overall financial situation of the country and other relevant issues, the prime minister made it clear that agriculture and food subsidies would continue.
The prime minister said since businesses were interested in paying more for gas to continue their production unhampered, gas would be imported even at a higher cost and supplied to industries at a premium.
She also directed the chairman of the National Board of Revenue (NBR) to impose additional duty on the import of luxury goods, including cars and fruits.
Tapan Kanti Ghosh, senior secretary of the Ministry of Commerce, told The Business Standard that since traders were willing to get gas at a higher price, the prime minister instructed import of gas at a higher price from the spot market and supply those at a higher rate as well.
"As there is little chance of increasing exports to Europe and the United States at the moment, the prime minister has directed to emphasise on increasing remittances to improve the balance of payment situation, ensure uninterrupted import of consumer goods and impose new duties to control the import of luxury goods," he said.
Sheikh Hasina also asked for action to be taken against local beneficiaries of hundi.
On the food front, Food Secretary Md Ismail Hossain told TBS that the prime minister instructed the central bank governor to provide the needed dollars so that the food ministry, as well as the private sector, can import rice and wheat according to demand.
The premier also asked the governor to ensure that in case there is a dollar shortage in any bank, the LC for food imports should be opened through other banks.
The governor said he will take action in this regard.
On the imports of LNG, a secretary present at the meeting said it was not decided whether the gas price in the country will be determined according to the gas import price or whether some subsidy would be granted in determining the new price.
He said currently the price of gas per cubic metre for captive generators is fixed at Tk16 and Tk11 for industries. If gas is imported from the spot market at the current international rate, the price will be Tk42 per cubic metre, but industries were willing to pay Tk28.
The Energy and Mineral Resources Division will send a summary to the PM proposing the new price of gas and it will be fixed on her approval, he said.
President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Jashim Uddin welcomed the prime minister's instruction to import gas even at an increased price to meet the demand for industries, saying due to the global slowdown, orders for garment exports have already dropped by 30%.
If the gas crisis continues, the orders that are available will not be able to be delivered on time.
Businessmen are ready to buy gas at higher prices if uninterrupted gas supply is possible, he said.
The rate of food inflation in the country will also decrease because of this as the gas shortage had cut sugar refining by 34%, resulting in a shortage of sugar in the market, he said.
President of the Bangladesh Chamber of Industries Anwar-ul Alam Chowdhury Parvez also lauded the premier's instruction, saying the most important thing for the country at the moment is to reduce inflation and increase foreign currency reserves.
For this, the production of consumer goods and export-oriented industries should go uninterrupted, and backward linkage industries should be kept running.
Shahidullah Azim, vice president of the BGMEA, told TBS that factories which have captive generators are willing to pay additional price on the condition of 24 hours uninterrupted gas supply. LNG import from the spot market will help the industry to sustain.
"Rather than shutting down the factory completely, it is good for the traders as well as for the country's economy if it is possible to carry out production activities at a little extra cost," he said.
Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association, said it was a positive move by the government to increase buyers' confidence.
"We are grateful to Prime Minister Sheikh Hasina, for such timely assistance for the industries during this crisis. On behalf of the BKMEA, in August we raised the demand to allocate at least another $200 million from reserves to import LNG from the spot market," he added.
Subsidies to remain
At the meeting, the Bangladesh Bank gave a presentation on the foreign exchange situation before the prime minister. Officials of the Finance Division showed the scenario of the increase in subsidies for fertiliser, electricity, energy and food compared to the budget allocation.
Advising the continuation of agriculture and food subsidies, Hasina also asked that necessary steps be taken to control subsidies in the energy and power sector.
The Finance Division told the premier that Tk82,000 crore has been allocated as subsidy in the budget of the current financial year, and Tk28,000 crore was spent on fertiliser imports in the last financial year.
According to the information of the Ministry of Agriculture, based on the six-month calculation, subsidy payments will be exceeding Tk46,000 crore this year.
The Trading Corporation of Bangladesh (TCB) is providing food assistance to one crore families. Food subsidy is also increasing due to import of rice and wheat at higher prices and running the OMS programme at earlier prices.
But subsidies had increased most in the power and energy sector. To reduce the subsidy pressure, the PM suggested price adjustment, demand-side management and additional borrowing from banks.
A secretary present at the meeting confirmed that although various options to reduce the subsidy were discussed, no specific decision was taken.
The PM said a developing country would experience budget deficits and high subsidies, advising increasing borrowing from the banking sector. "But the government will not completely withdraw subsidies on electricity and fuel," he added.
On reducing imports of luxury goods, the commerce secretary said his ministry had given a list of 340 luxury products to the NBR a few months ago and said to impose additional duties on those.
The Bangladesh Bank also increased the LC margin on luxury goods. New duties may now be imposed on less important and luxury goods.
Dollar volatility to subside in January
Regarding the foreign exchange situation, Bangladesh Bank Governor Abdur Rouf Talukder said he hopes that the volatility of the dollar market will decrease in January.
There is a gap in dollar rates – Tk99 is paid for exports and Tk105 for imports, but most countries don't have such a gap.
The governor hoped that the gap would be reduced gradually.