FE Today Logo


Fresh gas price hike to be too costly

Shahiduzzaman Khan | June 14, 2018 00:00:00

The government's plan to raise natural gas price by an average 75 per cent is facing stiff opposition from different consumer groups at the public hearing now in progress in the city.

In fact, all the state-owned gas distribution and transmission companies including Titas Gas have sought to hike gas prices by 75 per cent on an average for different consumer groups at retail level. Many allege that the gas sector is facing identical disaster like that of the country's banking sector.

In the 75 per cent average hike, the gas transmission company proposed to raise 206 per cent price for power plants as it proposed Tk 10 per cubic meter (CM) for power plants in place of existing price of Tk 3.16. For fertiliser factories, it proposed to hike the highest 372 per cent where it sought the price to be Tk 12.80 per CM against the existing rate of Tk 2.71 per CM.

The proposed increase in gas price will mainly affect large scale consumers like power plants, fertiliser factories, captive power plants, industries and CNG refuelling stations. Consumers groups say there is no justification to raise the price when Titas Gas has over Tk 20 billion surplus funds in its hand. It also lends the surplus money to different organisations.

What is surprising is that the technical evaluation committee of Bangladesh Energy Regulatory Commission (BERC), after analysing the gas price hike proposal, disagreed with the gas companies' plea and recommended that the transmission charge could be raised at best by Tk 0.1027 per CM to offset its revenue deficit that may occur on account of the implementation of new projects.

The technical committee also says the gas companies lack transparency in the cost calculation and also project implementation. In many cases, the cost of projects was overvalued and they're being implemented without following the open tender method which ultimately influences the gas price at consumers' end.

The committee has put forward some suggestions to bring structural change in the mechanism of fixing the gas price. Installation of gas meter, fixing gas price based on actual consumption and incentives for regular payment of bills by consumers are among some of them.

The issue of fresh gas price hike has generated adverse reactions from many consuming sectors. Textile mill owners say if gas price is raised, textile sector will lose competitiveness in the international market as it will raise their production cost by 40 US cents per kilogramme (kg) of spinning thread.

A Power Development Board (PDB) official says any rise in gas price will substantially affect the cost of electricity generation and compel them to raise the power tariff. Leather sector is also airing identical views.

Defending the price hike proposal, the gas companies claim that they have undertaken a number of gas transmission projects to facilitate the supply of imported LNG (liquefied natural gas). Besides, the company had to borrow a huge amount of money from foreign sources to implement such projects. Such steps will push up their transmission cost.

The current production cost of a unit of gas is more than Tk 09. The cost is set to rise to around Tk 14 per unit after marketing of LNG begins. As a result, the industrial and business communities will definitely be hit hard. Cost of one cubic feet of gas will rise up to Tk 14.90 from the current price of Tk 7.76. Price of a cubic meter of CNG will be Tk 51.70 from the current Tk 32. Commercial consumers of the gas will have to pay Tk 35, instead of Tk 17.04.

According to the projection, this hike may hit the domestic gas users, too. Users of single-burners may have to pay Tk 1,000 each instead of Tk 750 and those with double-burners, Tk 1,050 instead of Tk 800. Gas-fired power plants will also be affected by the increased gas prices.

With the launching of LNG, supply of gas from internal sources to the national grid will gradually be reduced. Its price hike in the international market will seriously affect the country's economy.

The consumer groups, on the other hand, say proposed gas price hike will bring multiple negative impacts on the public life. It will invariably lead to a rise in transport cost, electricity tariff and price of other consumer goods as well.

The nation, however, awaits a prudent decision to be taken finally by a five-member commission of the BERC, headed by its chairman. Until then, nobody knows what is going to really happen.


Share if you like