Gas price in Bangladesh raised by 23 Paisa: Oil & Gas on All-Time High

The Bangladesh Energy Regulatory Commission on Sunday announced an average increase of 22.78 percent in piped gas price at the retail level, making another round of hikes inevitable in almost all kinds of products.

As the price hike for natural gas, meeting over 60 percent of the country’s energy demand, came in the afternoon, protests against spiraling prices already brought parts of Dhaka to an almost standstill for hours.

‘The new gas prices will be effective from June,’ said Mohammad Abu Faruque, acting chair, BERC, as he announced the increased prices at a virtual press briefing.

The average new price is more than what the BERC’s technical evaluation committee recommended, which had justified a 20 percent price hike after evaluating the government’s proposal for a 117 percent increase in March.

Of the nine categories for which the new piped gas prices were announced, seven marked increases, with the highest rise of 260 percent in the fertilizer sector.

‘The government has decided to subsidize users, not the production,’ said Abu Faruque, explaining the steep fertilizer sector price increase.

Faruque also left a frightening hint at another revision of the natural gas price in six months.

On the nine occasions since 2008, the BERC has announced new gas prices, the prices have never seen a reduction. The last time the gas prices were revised with a 33 percent hike was in June 2019.

The domestic users of metered gas are to suffer the second-highest rate in the price increase of 43 percent with per cubic meter gas price climbing to Tk 18 from Tk 12.60.

For the domestic users paying a monthly fixed 

price, single gas burner users will have to pay Tk 990, up from Tk 925, while double burner users Tk 1,080, up from Tk 975, with the new prices coming into effect. 

The assumed domestic monthly consumption, the basis for the fixed domestic monthly bills, of gas was reduced to 66 cubic meters for double burners and 55 cubic meters for single burners from their previous volumes of 77 cubic meters and 72 cubic meters.

‘Domestic consumers use about 40 cubic meters of gas a month. They have long been overbilled by gas companies,’ Maqbul-E-Elahi Chowdhury, A BERC member, said at the press conference.

The price of each cubic meter of gas used for power production by the government has been increased by 13 percent while private captive power producers will have to pay 16 percent more for a cubic meter of gas compared with what they paid previously.

Large industries saw an increase of 12 percent in their price, followed by medium industries with a 10 percent increase in the piped gas price, the BERC said.

Commercial gas users such as restaurants and hotels saw their gas price increase by 16 percent, followed by the tea industry with a 12 percent increase in the price.

The BERC decided not to increase the price for the transport sector and to reduce the price of gas by 37 percent for small and cottage industries.

‘We did not want the transport fares to go up as the interest of consumers were our core concern,’ said Abu Faruque.

But the transport sector was already paying the highest price for a cubic meter of compressed natural gas or CNG at Tk 35 and was considered a sick industry by many because of the high gas price. 

The BERC analysis assumed a maximum 11 percent increase in the electricity price because of the gas price hike, Faruque said, suggesting it to be tolerable for all.

But many people were already cutting back on their protein consumption and education and health expenditures to save enough to afford two meals a day.

The BERC decision followed a public hearing held in March in which consumer rights activists and business representatives opposed the price hike citing a fall in people’s income, largely because of the Covid pandemic.

‘There is no meaning in holding such public hearings as the BERC did not accept any of our suggestions for avoiding this price hike,’ said M Shamsul Alam, energy adviser, Consumers Association of Bangladesh.

The CAB had advised the government to stop LNG import from the spot market and to not reduce the energy subsidy, especially when people were recovering from Covid-induced economic losses.

Imported LNG meets roughly 5 percent of the country’s annual gas demand.

Curbing the system loss, as high as 13 percent as reported by the largest state-owned gas distributor Titas, could save a lot of money, the CAB had said, blaming mostly gas stealing for the system loss.

The CAB also held the ‘predatory’ expenditure of the gas companies responsible for creating the need for the gas price hike.

‘This is called deception. The BERC went ahead with burdening people with more expenses rather than ensuring fairness,’ said Shamsul Alam.

Acting BERC chair Faruque said that the price increase was necessary for importing LNG and enabling gas companies to take on new projects.

The public hearing revealed that all gas companies were in profit even after paying all taxes, including VAT, and high dividends to their shareholders.

The companies justified their demand by raising the gas price by 117 percent for the purposes of taking new development projects to keep up with the government’s ambitious development plan.

The BERC arrived at the new prices, Faruque said, after considering Tk 11,800 crore in subsidy — Tk 6,000 crore coming directly from the government, Tk 2,500 crore from interests on the accumulated profits of gas companies and Tk 3,300 crore as contributions from the energy security fund.

While the government subsidy fell by more than Tk 1,000 crore, the overall subsidy counted by the BERC was Tk 600 less than what the CAB had proposed.

Since the incumbent government assumed power over a decade ago, the domestic gas use price has been increased on five occasions, including the latest one.

The domestic gas use price for double burners has increased 140 percent.

Bangladesh Textile Mills Association and the FBCCI in separate press releases welcomed the price hike and said that it would be tolerable to mill owners.

‘The BERC serves the government with its policy of picking people’s pockets,’ said Ruhin Hossain Prince, general secretary, Communist Party of Bangladesh.

‘Increasing price without checking corruption and inefficiency in the gas sector is an injustice to the people,’ he added.

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1 Comment

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