Distributors recommend 117% hike in one go to regulator

Speakers at a discussion meeting on the country's 'gas crisis' -dwindling reserves met with increasingly expensive imports - trashed a proposed price hike sent to the energy regulator by the state-owned gas distribution companies for drawing on erroneous assessment.

"The proposal to hike the gas price by 117 percent is abnormally high, and cannot be acceptable to justify only 5 percent import of gas at higher price from the spot market" said Mizanur Rahman, a former member of the Bangladesh Energy Regulatory Commission while discussing the issue.

Energy and Power, a fortnightly publication on arguably the most vital sector of the economy for any developing nation, organised the virtual discussionSaturday on "Gas Crisis and Price Hike Move, Challenges of Industrial Sector '' with its editor Mollah Amzad Hossain as moderator.

The seminar was also addressed by the eminent economist and executive director of the Policy Research Institute Dr Ahsan H Mansur, energy expert Dr Ijaz Hossain, former president of Dhaka Chamber of Commerce and Industry Abul Kasem Khan, FBCCI Standing Committee on Power and Energy Chairman Humayun Rashid and chairman of Forum for Energy Reporters Bangladesh (FERB) Arun Karmaker.

BERC recently rejected a proposal put together by a number of state-owned gas distribution companies to raise the gas price by 117 percent in accordance with the energy division's instruction.

According to gas industry insiders, of the country's total gas consumption, 78 percent is still locally produced from the country's own reserves, while 17 percent is imported on G2G (government to government) contracts that have a long-term price locked in.static price while only 5 percent is imported from a volatile spot market.

Mentioning the proposal, former BERC member Mizanur Rahman said the regulatory body rightly rejected the proposal. "The proposal was based on a wrong assessment," he added.

He, however, said the taxation part is separated from the total price, the enhancement could be by between 60-70 percent which is also unacceptable in the current structure of the gas market.

Dr Mansur said there was no long term strategy pursued for the country's energy sector and the current situation is a result of that negligence.

"This is now forcing the government to go for import of gas from the global market at a higher price," he observed.

This is a big failure that we could not diversify our energy basket and now we have to depend on import of gas for energy use, he said.

Professor Ijaz Hossain said it is a big question why the government did not move for exploration and preferred for import of gas at a higher price from the global market.

He said it is a wrong strategy to use local gas to produce fertilizer while gas is being imported for power generation.

Abul Kasem Khan said industries would inevitably bear the brunt of any price hike in the energy sector, and it may indeed pose a challenge, or even stand as an obstacle, to what everyone hopes will be a rapid and sustained recovery for the economy in the post-Covid period.

The scion of the AK Khan Group therefore views any move to raising the gas price at the moment as the 'wrong strategy'.

"The numbers being talked about would raise cost of production by upto 15 percent on average, across all sectors. That's not what you want when you're looking at your locally made products to compete in the international market, and hopefully secure some large orders for export," said Khan.

Humayun Rashid, who is better known as the managing director and CEO of Energypac than his role with the FBCCI, was unequivocal in his assessment of what effect an actual hike even close to what has been proposed to BERC would have: "It would create a bottleneck in the efforts to create the new jobs that will be necessary to accommodate all of those workers who will be looking to re-enter the active workforce. On the other hand, not hiking the price of gas would contribute more to the economy by pushing up the overall level of employment to pre-pandemic levels and hopefully beyond."

Arun Karmaker, a former special correspondent at Prothom Alo where he covered the energy sector for many years, blamed any crisis that could be forthcoming in the country's hydrocarbons sector as the inevitably bitter fruit of a longstanding culture of corruption and inefficiency that prevails even today.

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