State subsidies on account of LNG import in the current fiscal year (FY 2024-25) are estimated to be around Tk 160 billion, nearly three times previous FY's Tk 60.35 billion.
State-run Petrobangla has estimated the expenses considering the devaluation of the local currency taka against the US dollar while the government plans to ramp up imports of the liquefied natural gas (LNG) to meet growing demand for the fuel, officials said.
The subsidy for LNG this FY alone would constitute more than half the total amount paid to Petrobangla over the last six years since the beginning of import in FY '19.
According to sources at the Ministry of Finance (MoF), the government paid subsidies worth around Tk 25 billion in FY '19, Tk 35 billion in FY '20, Tk 34.97 billion in FY '21, Tk 60 billion in FY '22, Tk 63.32 billion in FY '23, and Tk 60.35 billion in FY'24.
During the first three months (July-September 2024) of FY '25, the amount of subsidy stood at Tk 30 billion, a senior MoF official told the FE.
Subsidies in the current FY are estimated to balloon as Petrobangla has planned to import a significantly higher volume of LNG to feed mounting demands from industries, power plants and other gas-guzzling consumers amid the domestic natural gas output being on the wane, market insiders said.
The country, for the first time, has planned to source a major portion of LNG from the spot market rather than the long-term suppliers this year as its spot LNG imports are set to double in 2025 compared to 2024, they said.
For this year, Petrobangla has planned to import 115 LNG cargoes - 59 from the spot market and 56 from long-term suppliers - registering a 33.72-percent increase over the previous year.
Last year, the country imported 86 cargoes - 56 from long-term suppliers and 30 from the spot market.
"Apart from the increased volume of LNG imports, the price gap between the cost of blended natural gas and its weighted average sales price is also widening mainly due to devaluation of the local currency against the greenback and higher costs of LNG imported," said one source.
Bangladesh blends imported LNG with local natural gas after its re-gasification.
According to Petrobangla, the cost of blended natural gas during FY '23 was Tk 19.09 per cubic metre (cm) and it soared to Tk 23.85 per cm in FY '24 and Tk 29.39 per cm in FY '25.
The weighted average sales price of gas, however, was Tk 11.91 per cm in FY '23, Tk 22.87 per cm in FY '24 and remained the same at Tk 22.87 per cm in FY '25.
The price gap between the cost of blended natural gas and its weighted average sales price was Tk 7.18 per cm in FY '23, which came down to only Tk 0.98 per cm in FY '24 following several rounds of hike in tariffs including the highest ever rate of 178.88 per cent.
Following the significant hikes, the price gap between the cost of blended natural gas and its weighted average sales price widened again to 6.52 per cm in FY '25, according to Petrobangla. The overall costs of gas rose to Tk 75.72 per cm in the current FY, it estimates.
To get out of the subsidy burden, Petrobangla recently proposed to set new tariffs for natural gas for new industries at par with the import cost of LNG.
It sent the tariff-hike proposal to the Bangladesh Energy Regulatory Commission (BERC). According to the proposal, the owners of all new industries and captive power plants must pay natural gas tariff as per the total LNG import costs for getting new gas connections.
New industries and captive plants, which already attained commitments or demand notes from companies for raising gas loads, must pay 50 per cent, or half the new gas commitments, at current rates.
On the other hand, the remaining half would be paid in accordance with the LNG import prices as spelt out in the tariff hike proposal.
Besides, the owners of existing industries and plants must pay tariffs as per import prices for utilising additional gas above their existing approved loads.
To calculate import prices for fixing tariffs, state-run gas marketing and distribution companies will calculate three months' average prices of overall LNG import costs from long-term LNG suppliers and spot LNG suppliers.
Currently, all industries-big, medium, small and cottage alike--are paying gas tariff at Tk 30 per cm, while the price of gas supplied to captive plants is Tk 31.50 per cm.
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