BERC conditions to gas price hike proposal
Wednesday, 3 December 2008
The Petrobangla (Bangladesh Oil, Gas and Mineral Corporation), which oversees and coordinates operations of all the state-owned energy sector entities, has been making bids to hike the gas prices at the consumers' end for quite sometime. It has been complaining about the gross mismatch between its cost of gas purchased from the international oil companies and the existing gas tariffs, leading to its substantial financial losses. But because of adverse circumstances, including the high inflationary pressure on the economy in the recent past, the corporation did not receive any positive signal from its parent ministry, the Ministry of Power, Energy and Mineral Resources. When the ministry started reviewing a Petrobangla proposal on gas tariff hike, the Bangladesh Energy Regulatory Commission (BERC) had drawn the attention of the ministry that law empowers the commission, not the ministry, to fix gas or power tariffs, after hearing the viewpoints of all stakeholders.
The BERC arranged such a hearing recently where the consumers, big and small, opposed any hike in gas tariff and highlighted their plight because of inadequate supply of gas, particularly to industrial units. On the day of taking decision on the proposed gas tariff hike on last Sunday, the commission came out with certain conditions that virtually nullified the Petrobangla's proposal. It has asked the Petrobangla to prepare a five-year strategic plan for augmenting gas supply and building up a 'gas development fund' so that the additional revenue to be generated through the proposed hike in gas tariff could be invested in the task of beefing up gas production. The commission has also questioned the quality of financial statements prepared by different entities under the corporation and asked the latter to prepare its statement of accounts calculating an average price of gas it purchased from different sources. What is more important is that the regulatory body has asked the corporation to undertake a programme to improve the quality of services it offers to the public by May 15 next.
It could be that the Petrobangla does really need to hike its gas prices because of the mismatch between the procurement costs and the gas tariff. But by attaching a few conditions to the gas price-hike proposal the commission has rightly reminded the corporation that it cannot remain oblivious of the need for augmenting the supply of gas and improving the quality of services provided to all types of consumers. Many existing industries have been suffering badly due to inadequate supply of gas and a good number of newly established industries, mainly in the Chittagong region, are not getting gas connections. The gas-fired power plants are running below their individual capacities due to gas short supply, leading to severe load-shedding.
Indeed, gas and power shortages together have been hurting the domestic production seriously for many years. The situation has reached such a stage that the government recently decided to allow setting up of private sector power plants that would only feed bulk consumers and arrange fuel supply on their own. The failure to augment supply of gas from the existing gas fields and conduct exploration for finding new gas reserves is generally attributed to the non-availability of necessary funds. So, the BERC conditions for making investments in the sector under a well-knit strategic plan from the additional money to be generated through the hiking of gas tariff, sounds logical. The Petrobangla should start working to that end without further delay.
The BERC arranged such a hearing recently where the consumers, big and small, opposed any hike in gas tariff and highlighted their plight because of inadequate supply of gas, particularly to industrial units. On the day of taking decision on the proposed gas tariff hike on last Sunday, the commission came out with certain conditions that virtually nullified the Petrobangla's proposal. It has asked the Petrobangla to prepare a five-year strategic plan for augmenting gas supply and building up a 'gas development fund' so that the additional revenue to be generated through the proposed hike in gas tariff could be invested in the task of beefing up gas production. The commission has also questioned the quality of financial statements prepared by different entities under the corporation and asked the latter to prepare its statement of accounts calculating an average price of gas it purchased from different sources. What is more important is that the regulatory body has asked the corporation to undertake a programme to improve the quality of services it offers to the public by May 15 next.
It could be that the Petrobangla does really need to hike its gas prices because of the mismatch between the procurement costs and the gas tariff. But by attaching a few conditions to the gas price-hike proposal the commission has rightly reminded the corporation that it cannot remain oblivious of the need for augmenting the supply of gas and improving the quality of services provided to all types of consumers. Many existing industries have been suffering badly due to inadequate supply of gas and a good number of newly established industries, mainly in the Chittagong region, are not getting gas connections. The gas-fired power plants are running below their individual capacities due to gas short supply, leading to severe load-shedding.
Indeed, gas and power shortages together have been hurting the domestic production seriously for many years. The situation has reached such a stage that the government recently decided to allow setting up of private sector power plants that would only feed bulk consumers and arrange fuel supply on their own. The failure to augment supply of gas from the existing gas fields and conduct exploration for finding new gas reserves is generally attributed to the non-availability of necessary funds. So, the BERC conditions for making investments in the sector under a well-knit strategic plan from the additional money to be generated through the hiking of gas tariff, sounds logical. The Petrobangla should start working to that end without further delay.