Industries, export to feel the pinch

The latest gas price hike would put further pressure on local industries and exporters already facing many internal and external challenges, say business leaders and chambers. 

The 15 percent increase in gas bills for industrial units and factories using gas-run generators comes at a time when exports are hit by low demand on the global market amid uncertainties stemming from Brexit, they say.

Moreover, cotton and yarn prices went up by 20 to 25 percent over the last two months. But the prices of apparel items, which account for more than 80 percent of Bangladesh's overseas sales, have not increased.

“Under these circumstances, the hike in gas price is like adding insult to injury,” said Fazlul Hoque, a leading garment exporter.

“The impact will be multidimensional,” he told The Daily Star yesterday.

On Thursday, Bangladesh Energy Regulatory Commission raised gas prices and decided to implement the increase in two phases.

For industries, gas prices were last increased by more than 100 percent in September 2015.

“We haven't yet been able to absorb the previous hike completely,” said Hoque, also managing director of Plummy Fashions, an internationally certified eco-friendly factory.

“The latest price hike was not expected at all… The timing is not good,” he added.

His company pays Tk 18 lakh in gas bills every month. Now, it would go up by another Tk 2-3 lakh.

On Saturday, the issue of gas price hike was discussed at Dhaka Apparel Summit.

Syed Nasim Manzur, a former president of the Metropolitan Chamber of Commerce and Industry in Dhaka, said gas price is a major issue for businesses that have to make long-term plans.

According to Bangladesh Economic Survey 2016, households consumed about 13 percent of the total gas produced in the country in 2014-15, while captive generators consumed 17.12 percent and industries 16.79 percent.

The Dhaka Chamber of Commerce and Industry said the gas price increase would push up the cost of doing business and also inflation.

“It will also impede export competitiveness, increase transportation costs and the overall cost of doing business,” it said in a statement on Saturday.

Gas-based power generation, captive power generation and fertiliser production would also be costlier due to this gas price hike, said the chamber.

The Exporters Association of Bangladesh (EAB) said the increase would harm all industries, including the export-oriented ones.

“The EAB thinks the hike goes against the interests of the manufacturers, consumers and the public alike.”

EAB President Abdus Salam Murshedy said the increase would have direct negative impacts on exporters of fish, frozen food, plastic, leather and garment, and also erode their competitiveness on the global market.

Gas prices have been raised at a time when garment exporters are already under pressure for meeting compliance following the Rana Plaza disaster, he said.

According to a survey of Bangladesh University and the State University of San Francisco, remediation cost at a garment factory is Tk 4.9 crore on average.

Sheikh Fazlur Rahman Bakul, president of Bangladesh Steel Mills Owners Association, said the industries don't get adequate gas supply even though they pay the bills regularly.

“There are days when we don't get any gas, and there are days when the pressure in gas supply is low.”

Zahid Hussain, lead economist of the World Bank in Dhaka, said gas prices in Bangladesh are low compared to those on the international market. 

He said Petrobangla would get more surplus money due to the price increase. But this money has to be used for the development of the gas sector.

With the country's gas reserves depleting fast, initiatives must be taken to improve infrastructure in the sector and explore new gas sources instead of keeping thousands of crores of taka in banks as idle money, he told this correspondent.

The economist noted that consumers would not complain much about paying additional prices if they are convinced that gas supply would increase and new gas connections would be given soon.

“At the moment, only the cost is going up, and there is no good news on increase in supply.”

Zahid suggested bringing reforms to the pricing mechanism and making it market-based.