Gas transmission and distribution companies have proposed nearly doubling the average tariff with the regulator opening a public hearing on Monday (Mar 11).
Business leaders and energy experts expressed anger over the latest government initiative for another gas price hike, just a little over two years after the Bangladesh Energy Regulatory Commission (BERC) raised tariffs for household users.
A proposal has been floated to double the average tariff to Tk12.19 per cubic metre from Tk7.35, according to officials familiar with the matter.
Meanwhile, the energy regulatory has began a four-day public hearing on Monday, at a time when five out of the six gas distribution companies are in the profit zone.
Between June 11 and June 21 last year, there was a similar hearing, and they finally backtracked from hiking gas prices, taking the ‘situation’ ahead of the 11th general election into consideration.
WHY THE PROPOSED HIKE?
An official of the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) said they need to adjust the price of imported liquefied natural gas (LNG), which costs around Tk 33 per unit in its super chilled form. After re-gasification, and being mixed with local gas, each unit of the LNG is priced at Tk 8.51.
“We want the tariff to be hiked as we have to provide a Tk27,000 subsidy to the gas companies taking into consideration, the 1000 mmcfd LNG import in the near future,” the official said asking not to be named as he was not authorised to speak to the media.
The government currently supplies only around 520 mmcfd (million cubic feet per day) of LNG but the price hike is based on the projected import.
About the profit being made by the gas companies, he said: “It is true that they are making a profit now, but that has nothing to do with the import of LNG.”
Bangladesh received a supply of regasified super-chilled fuel for the first time in its history, in August last year, after the maiden consignment of LNG reached Moheshkhali, Cox's Bazar, from Qatar in April 2018.
However, due to repeated technical glitches, the authorities kept struggling to continue a smooth supply in Chittagong. The Petrobangla and Energy Division have pledged that the rest of the country will soon be injected the LNG, which is yet to see any positive progress.
Bangladesh currently faces a shortage of 1 billion cubic feet of gas a day (bcfd), while the demand is around 3.7 bcfd. Considering the overall situation, the government signed the deal with Qatar to import 2.8 million tons of LNG annually for the next 15 years.
Bangladesh is also in talks with several other countries for importing LNG. A report by Copenhagen-based research firm Ramboll says Bangladesh will need annual imports of about 30 million tons of LNG by 2041, in order to meet rising demand for energy in the country.
WHAT THE PEOPLE HAVE TO SAY
Farhan Nur, general secretary of CNG Filling Stations and Conversion Workshop Association, said they contribute 23% of the revenue that Petrobangla collects from gas users.
But the revenue collection will suffer a serious setback if CNG refilling stations are imposed a fresh tariff hike, he feared.
According to him, the government has proposed the rise irrationally, especially for a sector which does not require any subsidies at all.
Bangladesh Textile Mills’ Association President Mohammad Ali Khokon said the apparel sector will be seriously affected if prices are increased.
“We are dependent on captive power, on which a whopping 63% increase has been proposed,” he said, recalling that the price of gas in the sector saw around a 700% rise since 2009.
“If the situation continues, we will incur huge losses,” he said.
M Shamsul Alam, energy adviser of Consumers’ Association of Bangladesh (CAB), said the government is doing it all in a “conflict of interest,” questioning why they have moved to raise the price again at a time when gas companies are making profits.
“Instead of ensuring a smooth and quality gas supply, the government is focused on making more profits,” he said.
Questioning why they are focused on LNG import, Badrul Imam, supernumerary professor of Geology at Dhaka University, said the government is more interested in importing gas rather than discovering and extracting new gas wells.
“It was a wrong plan to explore 108 wells in five years since Bangladesh does not have a history of digging more than one well a year,” he said.
State Minister for Power, Energy and Mineral Resources, Nasrul Hamid, said on Saturday they will gradually adjust the price of imported LNG, instead of raising gas prices at one go.
Earlier, on Mar 2 he confirmed the government has moved to raise gas prices, mainly for commercial and industrial consumers and for power plants to offset the losses caused by LNG imports.
The minister, however, said the government move will have no big impact on power tariffs as there is a plan to increase the use of gas to fuel power plants and also to retire some petroleum-fuel fired generation units.