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Proposed gas price hike abnormal

Experts say it’s freakish

Published : 18 Jan 2022 10:57 PM | Updated : 19 Jan 2022 01:49 PM

Bakhrabad Gas Distribution Company Limited submitted a proposal seeking over a 117 percent increase in natural gas prices in power, factories, households, CNG stations and other sectors, official sources said.

The state-owned company on Monday placed the proposal to the Bangladesh Energy Regulatory Commission (BERC). 

Energy sector officials argued that gas prices need to be increased to meet the shortage of funds required to import liquefied natural gas (LNG). However, the Consumers Association of Bangladesh (CAB) has described the proposed increase in gas prices as irrational and unprecedented.

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. 

Earlier, Bangladesh Oil, Gas & Mineral Corporation (Petrobangla) and it’s subsidiaries companies like-- Titas Gas Transmission and Distribution Company, Pashchimanchal Gas Company Limited, Jalalabad Gas Transmission and Distribution System Ltd submitted a separate proposal to the BERC last week seeking an increase in gas price. Although the proposal is separate, the companies have proposed to increase the price at the same rate. 

The BERC, however, directed the gas distribution companies to submit their proposals again citing that the submission was not in accordance with rules. Petro-bangla has also asked other companies to submit their proposals in this connection. The proposals will be placed in a day or two, sources said.

A round of hearing on the price hike is likely to be held before the Bangladesh Energy Regulatory Commission (BERC) next month, Bangladesh Post has learnt from various sources.

The last gas tariff was announced in July 2019, when the BERC increased the bulk gas price by 32.8% to Tk9.80 per cubic feet from Tk7.38.

The latest gas price hike move has come after the government enhanced diesel, kerosene and liquefied petroleum gas prices just two months ago. 

A BERC Member told Bangladesh Post that Bakhrabad argued that the price needs to increase due to increases in LNG price in the international market, which is unreasonable. Because, currently about 2300 million cubic feet of gas is produced from domestic filed, which has not increased any cost. 

The remaining 725 million cubic feet of gas is suppling from imported LNG. Out of these, the price was fixed for about 600 million cubic feet of gas for 10 years under a long-term contract. Only 100 to 125 million cubic feet of gas is being bought from the LNG spot market. For that, why the price of gas has to be doubled? 

Bakhrabad Gas Distribution Company Limited has proposed to be raised to Tk 2100 from Tk 975 for two burners, and Tk 2,000 from Tk 925 for a single burner in household gas users. 

According to official sources, the distribution companies proposed to raise gas tariff for pre-paid meter users in residences to Tk 27.37 from Tk 12.60 per cubic meter. Besides, the tariff for CNG proposed to raise from Tk 35 to Tk 76.04, and from Tk 23 to Tk 49.97 per cubic meter for hotel and restaurant.

The gas prices for small and cottage industries from Tk17.04 to Tk 37.02, from Tk10.70 to Tk23.24 in industry, from Tk 13.85 to Tk 30.09 in captive power, from Tk4.45 to Tk9.67 in power generation and fertilizer factories, from Tk10.7 to Tk 23.24 tea garden also proposed to raise, official confirmed.

Md Maqbul-E-Elahi Chowdhury, member (Gas) at BERC, told Bangladesh Post that the companies could not submit any logical explanation as to why the price should be increased. The commission directed them to submit their proposals again in accordance with rules

With the instruction of the Energy and Mineral Resources Division of the Ministry of Power Energy and Mineral Resources, the gas production and distribution companies have marched for the price hike, according to Petrobangla sources.

Opposing the gas price hike move, Professor M Shamsul Alam, Energy Adviser to Consumers Association of Bangladesh, said the Covid-19 pandemic has increased the living cost of most of the people on one hand and reduced income on the other. 

“The recent hike in diesel and kerosene prices has led to inflation. In such a situation an increase in gas prices won’t be the right decision. Its economic consequences will be terrible,” he said while talking to Bangladesh Post.

“If the price of gas is increased, electricity and other commodity prices will go up automatically. It will have a negative impact on the overall economy of the country,” he said.

Prof Shamsul Alam suggests rationing of gas supply in an effort to reduce subsidies.

According to sources, the price of LNG per thousand cubic feet was only $10 before August last year in the international spot market but now it has climbed to $45. 

The government had to give subsidies amounting to Tk 2,125 crore when it went to buy three ships of LNG from the international spot market on an emergency basis in October last. 

Terming the purchase of a huge quantity of LNG from the spot market ‘a wrong decision’, energy experts say a maximum of 10 per cent LNG should be purchased from the spot market and the rest 90 per cent should be procured through long-term agreements with multiple countries. 

The import of LNG to address the gas crisis has been widely criticized since the beginning of the process. LNG regasification from Qatar and Oman was being done with two FSRUs (Floating Storage Regasification Units) at Maheshkhali. An FSRU is now closed due to a torn mooring point while Qatar and Oman have communicated that they would reduce the supply of LNG next year.

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