The technical evaluation committee of Bangladesh Energy Regulatory Commission (BERC) rejected this week a proposal submitted by the Titas Gas and Transmission and Distribution Company for hiking the natural gas tariff.
The committee said the profits of the Titas Gas will reach Tk 31.27 billion, if gas transmission charge is hiked by Tk 1.13 per cubic metre and also in consideration of the newly fixed asset value of natural gas at Tk 25 per mcf (1,000 cubic feet).
In the context of the demand for revenue in the current fiscal year (FY), Tk 0.13 is enough for the transmission of a cubic metre of natural gas. The committee concluded that the current tariff of Tk 0.32 was already exceeding the company's revenue requirement by Tk 0.19 per unit.
On this point, the Consumer Association of Bangladesh (CAB) said that the Titas Gas has been witnessing year-on-year profits in recent times. It raised the question: Why should it then go for raising transmission charges?
On its part, the Titas Gas justified the proposal for the hike, saying that its cost of operation shot up due to the government's expansion programmes in gas transmission, most of which were not financially viable. However, at the public hearing, the Titas Gas failed to explain a number of grey areas over the proposed revision of charges, development projects, profit bonus sharing and recruitment process.
Although the gas marketing and distribution companies submitted tariff-hike proposals separately to the BERC, their proposed rates of hike were found to be identical. Both the companies had sought the highest hike of tariff for household consumers by 122 per cent, followed by captive power plants by 102 per cent.
They sought an increase in natural gas prices for domestic consumers, who use double-burner gas stoves, by 122.22 per cent to Tk 1,000 per month and by 112.50 per cent to Tk 800 per month for single burner.
For privately-owned smaller power plants, known as captive power plants, the proposal has been made with a tariff hike by 102.94 per cent per mcf to Tk 240 from Tk 118.26. The tariff hike for power plants has been sought by 5.24 per mcf to Tk 84 per unit for power plants from Tk 79.82 per mcf.
According to the proposal, for CNG filling stations, the price per cubic metre is to be increased to Tk 32 from Tk 23, which will force retail consumers to pay Tk 40 a unit, up from Tk 30.
The authorities, as analysts say, did not follow an appropriate rule to fix the asset value of natural gas at Tk 25 per mcf. Such analysts noted that the state-run Petrobangla has been using arbitrarily the Gas Development Fund (GDF) for non-productive purpose.
Added to this, system loss of the company has reached a critical juncture. Giving illegal gas connections on an unabated scale is still on, despite the government move to stop it. Titas Gas has recently found some 235 kilometres (km) of illegal gas pipelines. It has so far removed 185 kms of illegal pipelines.
Specialists in gas sector say the commission should not raise natural gas tariff on the basis of any likely hike in costs of natural gas with the start of use of expensive liquefied natural gas (LNG). The tariff could be raised when the LNG import starts, they argued.
At the public hearing held this week, the representative from Bangladesh Garment Manufacturers and Exporters Association (BGMEA) called upon the commission not to raise natural gas tariff. If the tariff is raised, production cost of the garment products will certainly rise.
Also, consumer rights groups, leftist political parties and professional bodies strongly opposed the proposal at the hearing. They said Titas Gas should lower its tariff, enabling the general people to receive gas at lower prices.
Even the small and captive power producers strongly opposed the distributors' proposal to hike gas price, warning any increase would put the industries in trouble. The industrialists say if the gas price is hiked arbitrarily, the cost of doing business would go up and the price of products would go beyond the purchasing power of most consumers.
There, they observe, should not be a double standard in the country. Otherwise, it will hurt the process of industrialisation and the economy. In the face of a severe power crisis in 2008 and 2009, industries were compelled to set up small power plants as production by the state-owned entity in the sector was unable to meet demand.
Some suggested that the decision on the proposed price hike of natural gas should otherwise be taken only after considering the overall aspects. There is also a need for a thorough review of the proposal.
Some years ago, an International Monetary Fund (IMF) report had suggested that pricing of natural gas in Bangladesh was considerably below the international levels, resulting in the forfeiture of a significant source of government revenue. It also creates substantial market distortions by encouraging conversion to CNG as a source of fuel, it said.
However, the IMF report did come under severe criticism by the country's experts and economists. They say donors are otherwise concerned only about the impact of huge subsidy on the budget. But everybody has to keep it in mind that there will be an adverse effect on the country's agricultural sector, if subsidy in withdrawn.
Per capita income of the people will most likely fail to match the price-hike of the gas, electricity and fertiliser. The farmers will be the worst hit, they said.
Indeed, public sufferings reached a point of no return after so many tariff hikes at regular intervals. Successive governments raised the power tariff most frequently, but did not ensure its uninterrupted supply. Prices of gas and electricity were raised at regular intervals as prescribed by the donors.
It is not yet known whether the technical committee's rejection of the gas tariff-hike plea will be upheld by the authorities or not. But it is certainly gratifying to note that a committee set up by the government itself has nullified the hike proposal. After the end of the few more public hearings, it is to be seen how the BERC takes a final decision on this sensitive issue.
szkhan@dhaka.net
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