It has been alleged that the Finance Division is exerting pressure in various ways to increase the price of gas before Eid even though subsidy has not been allocated as per the demand.
Bangladesh Energy Regulatory Commission (BERC) feels embarrassed due to the pressure. Several reliable sources confirmed this on condition of anonymity.
BERC sources claim that all of the distribution companies are in profitable condition. Their accumulated profit is about taka 12,000 crore. Due to the war in Ukraine, abnormal gas prices are prevailing in the world market. However, it will come down at any time, there is a logical appeal of consumers not to increase the price based on abnormal price. That is why BERC wants to make a decision after understanding the situation for some time.
However, there is repeated pressure from the finance division. It is also being said that the hike order should be given before Eid.
Professor M Shamsul Alam, energy advisor of the Consumers Association of Bangladesh (CAB), said, “The finance division can't put pressure on this. The independence of BERC is curtailed if it works according to the finance division.”
The BERC held a public hearing on the gas price hike proposal from March 22 to 24. Earlier, a letter was sent to the Energy and Mineral Resources Division on March 13 stating the amount of subsidy. However, it was not reported. Later on March 31, the letter was resent.
According to the letter, the commission had fixed the government subsidy at Tk 2.49 per cubic meter during the gas price hike in 2019. It needs to be known whether the government will subsidize the gas sector in the current financial year.
Energy expert Professor M Shamsul Alam said “Petrobangla could not justify the increase in gas prices. We have calculated that the price of gas can be reduced by taka 0.16. Around taka 7,000 crore is supposed to be subsidised, so far only taka 3,000 crore has been given.”
He said the government is taking money in various ways including VAT and also taking money from the GDF (Gas Development Fund) formed with the consumers’ money. It is also forcing the decision of which company will pay how much dividend. They are making a profit and the companies are demanding money from the customers in the name of project implementation. The responsibility of the government as the owner is to finance the implementation of the project. The companies have proposed to increase the distribution margin for project implementation.
The technical committee formed by the BERC has recommended an average increase of 20 percent in gas prices at the consumer level in a four-day public hearing on the gas price hike from March 21. However, BERC officials said the commission would take a final decision on raising gas prices based on government subsidies.
As an argument for the increase in gas prices, Petrobangla said that the price of LNG has gone up in the international market and LNG has to be imported at a higher price from the spot market. So the price has to go up.
According to Petrobangla, the amount of gas in the spot market is only 3 percent. Consumers have termed the 116 per cent price hike proposal as unreasonable as the price of gas has gone up marginally.
High-priced liquefied natural gas (LNG) is being imported without emphasis on exploration and production of gas. As a result, the prices of gas are rising and the people are suffering due to the burden of extra cost.
Terming the purchase of a huge quantity of LNG from the spot market ‘a wrong decision’, energy experts say a maximum of 10 percent LNG should be purchased from the spot market and the rest 90 per cent should be procured through long-term agreements with multiple countries.
Petrobangla has sent an estimate of the cost of gas supply to BERC. It is said that the cost of gas produced by a domestic company is taka 1.27 per unit, while the cost of gas produced from a domestic gas field through foreign companies is taka 2.91. In case of imported gas, the cost per unit this year will be taka 50.39. In a letter to the commission, Petrobangla said it would need Tk 44,265 crore to import LNG this year.
Petrobangla estimates that 73 percent of the total gas supplied this year will come from domestic gas fields. The cost of Petrobangla for this will be around taka 5,572 crore. The remaining 27 percent of gas will come from imports, which will cost taka 44,265 crore. The pressure on consumers is increasing for importing gas at higher prices.
Cab says gas prices at the consumer level have risen 129 percent in a decade. The monthly bill for gas for two burners used in households has increased from taka 400 to taka 975. Now it has been proposed to make it taka 2,100.
Energy experts said that due to the managerial weakness and inefficiency of the gas transmission and distribution company, 65 crore cubic meters of gas is being wasted (system loss) every year. Gas is also being wasted regularly due to illegal connections, overuse and leakage in the pipeline. The cost of importing LNG per cubic meter is currently taka 50. According to this, the cost of 65 crore cubic meters of gas wasted annually is Tk 3,274 crore.
“It is possible to save thousands of crores of taka of gas by stopping theft. However, the government is buying liquefied natural gas (LNG) at high prices to meet the shortage without taking any effective measures to stop the theft,’ energy experts said. Experts say the country should give more priority to domestic oil and gas exploration to lessen the dependence on imported LNG, but the issue has long been neglected.
