Bangladesh raises gas tariff for new industries to meet import costs

New industries in Bangladesh will have to count additional costs for natural gas consumption as the country's energy regulator raised the natural gas tariff for such industries and captive power plants by an average of 33.33%, with effect from April 13.

The Bangladesh Energy Regulatory Commission raised the tariff for new industries and captive power plants following a late February public hearing despite protests and opposition from businesses and rights groups, market insiders said. BERC Chairman Jalal Ahmed announced the new tariff at a press briefing in the capital city of Dhaka on April 14.

The tariff for new industries has been fixed at Taka 40/cu m from the previous Taka 30/cu m and captive power plants at Taka 42/cu m from the previous Taka 31.50/cu m.

As per the BERC's tariff hike directive, the new industries and captive plants, which already attained commitments or demand notes for raising gas loads in their existing factories, must pay 50% of the new gas commitments at previous rates. The remaining half would have to be paid in accordance with the new tariff rates.

The owners of existing industries and plants must pay tariffs as per the new rates for utilizing gas above their approved loads in their existing factories, Ahmed said.

The BERC hiked the natural gas tariff in line with LNG import costs. State-run Petrobangla and its subsidiary gas marketing and distribution companies had sought a hike of up to 152.40% in their submissions placed in January.

Bangladesh has been struggling to clear LNG bills to suppliers over the past couple of years.

To ensure payments to suppliers, the country's energy and mineral resources division under the Ministry of Power, Energy and Mineral Resources recently sought around $1 billion from the Ministry of Finance by June, a senior finance ministry official told Platts on April 14.

Bangladesh has not defaulted on gas bills to international oil companies and LNG payments since the initiation of gas imports in 2018, a Petrobangla official said. The country's eroding capacity to make payments was being driven by global economic challenges amid the Russia-Ukraine war, which has caused prices of various commodities, including oil and grains, to spiral, according to the source.

Eroded payment capacity

"We have raised the gas tariff at a tolerable level for new industries and captive power plants although the demands from the state-run entities were for raising further by over 150%," the BERC chairman said at the press conference.

Ahmed could not say whether the tariff hike would impact future investments but said that it would create an opportunity to look for alternative energy sources such as LPG and solar power for future industries.

If the tariff had been hiked to the demands of state-run gas entities, Petrobangla could fetch an additional Taka 32.40 billion, but with the 33% hike, it would get around Taka 11 billion, according to the Petrobangla official.

The BERC chairman could not specify the subsidy Petrobangla would require due to the new gas tariff, but said the subsidy requirement would decrease.

Opposition to tariffs

The Consumers Association of Bangladesh had boycotted the public hearing, while business leaders and associations had opposed the tariff hike move.

"Having different gas tariffs for the same type of consumers is discriminatory and a violation of the basic rights as mentioned in the constitution," energy adviser of the CAB and professor Shamsul Alam told Platts on April 14.

Petrobangla could save around taka 35 billion if double taxation against imports of expensive LNG could be removed, he said.

Bangladesh's export-oriented sectors may face a slump in export earnings due to uneven competition after the gas tariff hike for new industries, according to Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association. Hatem urged the interim government to take steps against gas pilferage.