Gas Price Hike: New factories face double costs in industrial sector

The Energy Division has given in-principle approval for a new gas pricing structure in the industrial sector. As a result, entrepreneurs will have to pay more than double the current price to purchase gas for new factories. According to the proposal, gas prices for new factories will align with the import cost of Liquefied Natural Gas (LNG). The proposal was sent to the Bangladesh Energy Regulatory Commission (BERC) via Petrobangla on Monday afternoon for finalisation, with discussions expected at BERC today.

Currently, industrial consumers pay Tk30 per cubic metre for gas and Tk30.75 per cubic metre for captive power (self-generated electricity). The average import cost of LNG is between Tk60–65 per cubic metre.

Business leaders have expressed concerns, pointing out that while gas prices have been nearly doubled with promises of uninterrupted supply, many factories remain shut due to gas shortages. If prices increase further amidst this crisis, investments in the industrial sector could completely halt.

Hatem Ali, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said: “If the new proposal is passed, it will create an uneven playing field. Some will pay Tk30 for gas, while others will pay double. New entrepreneurs will not survive, and investments will come to a standstill.”

Professor Shamsul Alam, Senior Vice President of the Consumer Association of Bangladesh (CAB), criticised the move, saying: “Consumers are not receiving gas, yet they are still being billed. Over the past two years, gas prices have been increased in phases. Higher gas prices in industries lead to increased product costs, driving inflation.”

He also noted that the Energy Division’s pre-approval of the proposal before sending it to BERC was inappropriate and criticised the decision amidst the country’s current fragile economic situation.

Petrobangla currently supplies an average of 2,850 million cubic feet of gas daily, with 850 million cubic feet sourced from LNG imports. In the fiscal year 2023–24, the average cost of gas per cubic metre was Tk24.38, while Petrobangla sold it at an average price of Tk22.87.

Petrobangla procures gas domestically at the following rates: Tk1 per cubic metre from the Sylhet Gas Field, Tk1.25 from the Bangladesh Gas Field, Tk4 from BAPEX, Tk6 from Chevron and Tullow.

In comparison, LNG imported from the spot market in the 2023–24 fiscal year cost Tk65 per cubic metre, with the average spot price in August recorded at Tk71.

In February 2023, a government executive order increased gas prices by an average of 82%, raising the industrial gas price from Tk11.98 to Tk30, and the captive power price from Tk16 to Tk30.75. These price hikes drew widespread criticism. Later, the interim government repealed the legal provision that allowed the setting of gas and electricity prices by executive order.

Amidst current economic challenges, stakeholders warn that further gas price increases will weaken industrial competitiveness, discourage new investments, and exacerbate inflationary pressures in the market.