Government's subsidy for liquefied natural gas (LNG) procurement is set to surge 27.27 per cent year on year to Tk 70 billion in FY2024-25, starting from today (Monday).
This comes despite the authorities raising gas tariffs at least five times in the past six years and the International Monetary Fund (IMF) pushing for phasing out energy subsidies.
In FY24, the Ministry of Finance provided around Tk 55 billion as an LNG subsidy, State Minister for the Ministry of Power, Energy and Mineral Resources Nasrul Hamid told parliament recently.
He said the government has spent over Tk 262.15 billion (US$2.38 billion) on subsidies since initiating LNG imports in 2018.
Bangladesh has been subsidising LNG purchases from the international market since FY19, said the state minister.
In FY19, the subsidy was Tk 25 billion. It rose to Tk 35 billion in FY20, followed by Tk 24 billion in FY21. The government provided Tk 60 billion and Tk 63.15 billion in FY22 and FY23, respectively, Nasrul Hamid told the National Parliament.
According to official data from the state-run Hydrocarbon Unit (HCU), Bangladesh's cumulative LNG imports reached 23.265 million tonnes until February this year.
'Additional imports to inflate subsidy further'
A senior Petrobangla official said the government's LNG subsidy is expected to rise further due to import and re-gasification costs exceeding the selling price of re-gasified LNG.
Amid the recent ramp-up of the country's overall LNG re-gasification capacity, procuring additional LNG volumes from the international spot market, alongside purchases from regular long-term suppliers, will further inflate the LNG subsidy, the official added.
The country's overall LNG re-gasification capacity from its two terminals increased by 10 per cent to around 1.10 billion cubic feet per day (Bcfd) earlier this year, rising from around 1.0 Bcfd.
A senior official from the state-owned Rupantarita Prakritik Gas Company Ltd (RPGCL) said the non-operation of the Summit LNG Terminal since late May after Cyclone Remal damage and the subsequent cancellation of four spot LNG cargoes could slightly squeeze the overall LNG imports compared to the original plan.
Summit's floating storage and re-gasification unit (FSRU) is expected to resume re-gasification by mid-July after the repair, the official added.
Gas tariffs increased five times in six years
The authorities have raised natural gas tariffs at least five times in the past six years since initiating LNG imports in 2018, according to official data.
The most recent hike was on April 30, 2024, with a 2.43-5.08 per cent rise in natural gas prices for power generation, effective from May 1.
This hike raised gas tariffs for private power plants (IPPs) and rental power plants to Tk15.50 per cubic meter -- up from Tk14.75.
The price for gas supplied to gas-based power plants used by industries (captive power) also increased to Tk31.50 per cubic meter from Tk30.75.
Previously, the government raised natural gas tariffs for the same gas-fired power plants by 2.5-5.36 per cent through an executive order on February 27, 2024, with retrospective effect from February 1.
In January 2023, the country witnessed its steepest gas tariff hike to date -- with an increase of up to 178.88 per cent for all domestic consumers, effective from February 1, 2023. This increase excluded households, fertilizer factories, compressed natural gas (CNG) and tea estates.
The Bangladesh Energy Regulatory Commission (BERC) raised tariffs in 2022, with a 22.78 per cent average increase on June 5, effective from June 1.
Before that, the first natural gas tariff hike after initiating LNG imports in 2018 occurred on July 1, 2019, with a 32.8 per cent average increase by BERC.
Power generation accounts for the largest share of consumption at 37 per cent, followed by industries at 23 per cent, captive power at 18 per cent, households at 10 per cent, fertiliser production at 7.0 per cent, CNG at 4.0 per cent and commercial and tea industries at 1.0 per cent combined.
'Mounting subsidy a growing pain'
Energy expert Professor M. Tamim expressed concern about the rising LNG subsidy, saying, "It is a growing strain on the country's fiscal health."
He advocated for exploring domestic hydrocarbon resources from local gas fields as a possible solution to the crisis.
Bangladesh has eight categories of natural gas consumers, according to official data from the Ministry of Power, Energy and Mineral Resources.
azizjst@yahoo.com