Rationalising fuel gas price

State Minister Nasrul Hamid is on record, saying that the government is considering an increase in natural gas price that is very low compared to international market level. The government is also taking steps to import LNG to reduce gap between gas demand and supply.

In international market, per unit LNG price is around US$15.00. The international oil companies (IOCs) operating in Bangladesh are charging US$3+ per unit of fuel gas. The local gas explorers are getting Tk25.00 for the same. On an average, per unit cost of gas is around US$2+ now in the country. The Petrobangla has to increase price substantially when LNG import will start even if the government tries to provide gas to consumers at breakeven price.

Alternatively, a huge subsidy has to be paid by the government to gas sales. This is not considered prudent to economists from national interest point of view. To make consumers compliant with the international price, the government has to increase price of fuel gas gradually.  At the beginning, the government should increase price of gas produced by local explorers equal to that for IOCs operating in Bangladesh.

In the next phase, the government should follow a single price for gas for all consumers in the country. There are eight different prices of fuel gas now. In case of petroleum products, the government is following a single price for a particular type of petroleum products. For example, octane has the same price irrespective of consumers. Like that, diesel also has a single price.

In every six months, all prices for the consumers can be increased to the next higher price except the highest one. In this way, a single price of fuel gas should be fixed.

The government is already providing subsidy to different fuel products. For instance, it is giving subsidy to diesel. Again subsidy is being given to power that is generated with diesel. The government should consider subsidy when necessary to end-products only, but not in intermediate stages.

mah120cb@yahoo.com