Gas price hike will bring ‘more loss than profit’

The government may have hiked gas prices in order to shed the burden of subsidy for importing LNG, but the move will ultimately result in losses than profit, economists, businesses, and consumer rights groups believe.

The gas price hike will increase production cost in the largest export-based sector of the country by one percent, Bangladesh Garment Manufacturers and Exporters Association or BGMEA says.

An economist has described hike in gas prices every year as the “negative outcome of weak policymaking”.

In reaction to the latest rise in gas prices, the Consumers Association of Bangladesh or CAB has alleged that the government has made arrangements to increase consumers’ spending instead of taking steps to stop corruption in the sector.

The BNP and some leftist political parties have threatened to stage protests if the government does not roll back the gas price hike.

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Despite objections from different quarters during public hearings in March, the Bangladesh Energy Regulatory Commission or BERC on Sunday announced the hike in gas prices on an average of 32.8 percent from July 1.

It has increased gas prices for household users without meter by 23 percent and with meter by 38 percent.

The price of compressed natural gas, or CNG, used to fuel vehicles, will rise by 7 percent.

Besides rise in cooking cost and fare, the people will have to pay more to buy products as gas prices for production of power and fertiliser, and industries and commercial lines have been increased between 35 percent and 65 percent.

“Cost has increased due to gas rationing for different sectors. Maybe it is logical considering the situation,” Selim Raihan, a Dhaka University economics teacher and executive director of South Asian Network on Economic Modeling (SANEM), said.

“But,” he added, ”Increasing prices at these rates on the basis of short-term plans will have a rather negative effect at industrial, commercial and consumer levels.”

He thinks such price hikes should be based on long-term plan so that the consumers get enough time to prepare.

“Moreover, the process to raise gas prices should be more transparent,” he said.

BGMEA President Rubana Huq, in an instant reaction to the gas price hike, said the 1 percent rise in production cost triggered by the gas price hike will hit the apparel sector hard.

“This may not sound much in terms of percentage, but for an industry struggling for every penny this will be another blow,” she said.

"Now given the fact that the supply situation of gas has not improved and factories are suffering from pressure fluctuations, we are already at the tipping point with regard to pricing, whereas entrepreneurs are not feeling encouraged to invest due to numerous challenges.

“And this sudden increase in gas price has upset their financial plan, such an increase in price would only add to our production costs, making the business difficult for the SMEs whose breakeven is on a thin ice now,” she added.

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Defending the gas price hike for LNG import, BERC Member Mizanur Rahman said the government will have to spend Tk 180 billion on subsidy and 33 percent of the amount or Tk 81.6 billion will come from hiked gas prices.

Of the rest, 29 percent or Tk 76.9 billion will come from government funds and Tk 24.3 billion from the Energy Security Fund, according to him.

But, CAB Energy Adviser Professor Shamsul Alam says they have demanded abolition of the security fund as the association believes only cutting corruption in the sector will save the government at least Tk 50 billion in subsidies.

“As much as 10 percent gas gets stolen. So we placed some specific proposals to rid the sector of corruption. The government would have been able to adjust Tk 40 to 50 billion if steps were taken to stop this theft," he said.

CAB President Ghulam Rahman said the overall gas price hike will heap “more pain” on the low-income people.

The High Court had said while hearing a writ petition filed by CAB against the gas price hike proposal that cutting corruption at Petrobangla and state-run distributor Titas by 50 percent would have ended the need for hiking the prices.

BERC should have addressed the “mismanagement” instead of raising prices, the CAB chief said, referring to the High Court comments.

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Gas price hike is “of course bad news for general people”, according to Tahmina Yasmin Shilpi, a resident of Kazipara in the capital.     

“It will drive up the living cost…Gas price is rising every year. It’s really troubling for us, the general people,” she said.

BNP Secretary General Mirza Fakhrul Islam Alamgir has said in a statement: “The government must abandon this anti-people decision, otherwise a stteet movement will be waged.”    

The Communist Party of Bangladesh or CPB President Mujahidul Islam Selim said they would demonstrate outside the National Press Club in Dhaka against the gas price hike on Monday afternoon.

Bangladesher Samajtantrik Dal or BaSaD organised a rally there on Sunday evening.

The government increased gas prices to give benefits to "a certain quarter", BaSaD General Secretary Khalequzzaman alleged.

Rashed Khan Menon, president of the ruling Awami League’s ally the Workers Party, also protested against the decision to increase gas prices.

“It’s totally unreasonable,” he said, and added he has demanded discussion on the issue in parliament.