Petrobangla doubly indebted following gas-price hike

Financial crunch incapacitates Petrobangla to pay its way as gas bills defaulted by state-owned power plants and fertilizer factories balloon after tariff hike, said sources.
The energy corporation, as such, is left in a double bind: it is failing to make payment to overseas LNG suppliers and domestic natural gas- producing multinationals while overdue bills getting accumulated.
State-run power plants and fertiliser factories have been in default on gas bills for over past nine months, the sources added.
The corporation has long been facing problems in paying dues regularly to liquefied natural gas (LNG) suppliers and international oil companies (IOCs) against gas purchases.
Power plants and fertiliser factories in public sector now owe around Tk 130 billion, equivalent to US$1.18 billion, to Petrobangla against gas buys.
The state-owned gas-based power plants have stopped paying gas bills over the past nine months, and the arrears accumulated to around Tk 110 billion, the sources said.
They have refrained from paying bills against gas purchases for electricity generation since February this year, in a huff over tariff hike.
The government jacked up retail prices of gas by 14.5 per cent to 178.9 per cent for industries, power plants and commercial establishments by an executive order on January 18, which came into effect on February 1.
The price of gas used for power generation was hiked to Tk 14 per cubic metre from previous Tk 5.02 through the government directive.
But the publicly owned gas-guzzling power plants are not paying tariffs at the enhanced rate, said a senior Petrobangla official.
"Like the power plants, state-owned fertiliser factories also ceased paying gas bills since February and the default bills mounted to around Tk 20 billion," he said.
Although the government did not raise gas tariffs for fertiliser factories in January 2023, Bangladesh Energy Regulatory Commission (BERC) had ordered a 259.55-percent hike for these factories with effect from June 2022.
The fertiliser factories have ceased paying gas bills since June last year, it has been alleged.
"Without sufficient local currency in bank accounts, the banks would not agree to open necessary letter of credit (LC) to import LNG or pay sufficient US dollars to clear outstanding dues," he adds.
Privately owned gas-fired power plants and industry owners are, however, paying gas bills at enhanced rates in line with the government directive, sources have said.
"We are paying gas bills at actual rate," president of Bangladesh Independent Power Producers Association (BIPPA) Faisal Khan told the FE Sunday.
"The industry owners are also paying gas bills in line with government's latest directive at higher rates," said the Petrobangla official.
The energy corporation currently owes around US$300 million for gas purchases from Chevron that produces the highest quantum of natural gas in Bangladesh-in the wake of reported foreign-exchange crunch in the exchequer.
To get out of the debt trap, the corporation has initiated talks to borrow around US$500 million from the Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IsDB) Group, to clear the pending payments to the IOCs and the LNG suppliers.
But the loan has yet to be sanctioned.

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