Pricier, next year

The new year is likely to begin with a sour note for consumers, from households to businesses and industries, as the prices of gas and electricity are set to go up.  

Retailers and wholesalers have submitted proposals to Bangladesh Energy Regulatory Commission (BERC) to have the prices adjusted on January 1. 

In favour of their proposals, gas retailers argue that the prices are very low in Bangladesh compared to neighbouring countries. The PDB, lone buyer and seller of wholesale electricity, says the production cost is higher than retail tariff.

Depending on users, gas prices might increase between 5 to 122 percent. The bulk rates of electricity might increase by 18.12 percent after a traditional adjustment in retail prices.

"All prices will be finalised through public hearings," Salim Mahmud, a member of BERC, told The Daily Star yesterday. They plan to conduct three hearings next month -- one on gas price and two on electricity tariff.  

According to the proposals, power plants will have to buy 1,000 cubic metres of gas at Tk 84. The price is now Tk 79.82.

For the same amount of gas, fertiliser factories, captive power plants, industries, tea gardens and commercial buildings will have to pay respectively Tk 80 (up from current price of Tk 72.92), Tk 240 (from Tk 118.26), Tk 220 (from Tk 165.91), Tk 200 (from Tk 165.91) and Tk 350 (from Tk 268.09).

CNG stations will have to buy gas at Tk 1,132.67 per 1,000 cubic metres. It's now Tk 651.29.

Households with metered cooking stoves will see a price hike of 60.68 percent to Tk 235 from Tk 146.25.

Houses with one-burner stove will see their monthly charges for cooking go up by 112.50 percent to Tk 850 from Tk 400.

For two-burner stoves, the rise will be 122.22 percent to Tk 1,000 from Tk 450.

The average sales price of 1,000 cubic metres of gas now stands at Tk 139.62, which retailers say are much higher in neighbouring countries.

Retailers have proposed increasing the average retail prices by 40 percent to Tk 195.70 per 1,000 cubic metres, according to the documents seen by The Daily Star.

Due to the low cost, there has been a huge wastage thanks to inefficient usage of gas, depriving the government of revenues.

Last time the government raised the gas price was in 2009. In the last six years, only CNG prices went up twice in 2011, said Salim Mahmud of BERC.

Though the gas prices went up by 11 percent in 2009, all the additional money accrued from the raise went to the Gas Development Fund.

Meanwhile, the Power Development Board (PDB) has proposed a 18.12 percent rise in bulk electricity rates.

The State-run PDB sells power to the five retailers at an average rate of Tk 4.67 per kilowatt-hour unit of electricity although the production cost is Tk 6.54 per unit.

This gap has imposed a bulk tariff deficit of Tk 1.87 per unit on PDB. The government had to pay a subsidy of Tk 7,560 crore related to the tariff-induced deficit in 2013-14, said Salim Mahmud.

The Rural Electrification Board (REB) has expanded its customer base tremendously in the last several years, he added. "As a result, PDB is being forced to incur losses as the PDB sells electricity to the REB in the lowest rate in the country."     

The PDB has proposed an increase of Tk 0.84 per unit to take the bulk tariff rate to Tk 5.5 per unit.

The bulk power tariff (the prices retailers pay) will go up first and then the retail tariff (the prices end consumers pay) will be adjusted, added the BERC member.

"This is a major jump in household gas price. It will be another burden on us," said Afsana Moni, a housewife in the capital's Mirpur area, when asked about the latest move to raise gas and power tariff. 

Asif Ibrahim, vice-chairman of New Age Group, said the increase of gas prices for industry would reduce the overall competitiveness of the manufacturing sector.

"If other infrastructural supports were adequate and the cost of capital in single digit, perhaps the industry could have absorbed the impact. But at this moment the increase in energy cost will be a huge burden," he told The Daily Star.

He said the export-oriented industries will suffer more as they compete against other countries to procure orders.

"The garment sector is going through a massive restructuring phase and entrepreneurs are undertaking large investments to meet the international compliance standards. At this juncture, the garment sector should be exempted from further increase in direct expenditures," said the former president of Dhaka Chamber of Commerce and Industry.

The government last raised the bulk electricity tariff in September 2012 while the retail tariff increased in March this year. In the last six years, the retail power tariffs increased five times.