Gas price increase move comes on wings of failure, policy flaws

Published: 00:05, Sep 22,2017 | Updated: 00:04, Sep 22,2017

 
 

THE proposal that the state-run Oil, Gas and Mineral Resources Corporation, or Petrobangla, has drafted seeking an increase in prices of natural gas by up to 105 per cent in view of the cost of import of liquefied natural gas, scheduled to begin in April 2018, if put in effect, would be a major disadvantage, generally for the industrial sector as a whole and especially for the backward linkage industries in the apparel sector. While gas distribution companies, which are subsidiaries of Petrobangla, are reported to be taking up the issue with the Bangladesh Energy Regulatory Commission after LNG import begins in April, the government is likely to examine the probable impact of the price increase on the national economy and sit with all major consumers of natural gas before deciding the increase. Petrobangla took the price increase initiative seven months after the Energy Regulatory Commission had increased gas prices by 22.7 per cent on an average in two phases, beginning with March and June. Any increase in prices of gas, however, will deal a blow and will have a cascading effect, forcing front-end industries to suffer further. The industries will need either to pay higher to linkage industries or import what the linkage industries supply.
The proposed increase, if effected, is likely to hit the industrial sector hard. The government, therefore, should examine the issue thoroughly and discuss the issue with all stakeholders in a proper way before it decides the increase in natural gas prices. The government has, however, sought to explain that it would need to increase the prices after four to five years when at least 2,500 million cubic feet of natural gas would be supplied from imported liquefied natural gas in the event of declining supply from indigenous gas fields, which would drop below 2,000mmcfd from the current supply of 2,750mmcfd. The level of supply would start declining from 2018 and, as the government thinks, there is not much hope reposed in oil and gas exploration, onshore and offshore. The admission points to a failure of the government and a way out for the future. The present crisis in the gas sector has been forthcoming mainly riding on the government’s negligence towards oil and gas exploration for years. The government has increased allocation for the purpose and has earned revenue that could be invested in indigenous exploration of oil and gas. But it did not happen. The government has, thus, failed to lay its hands on any major gas reserve because of its policy for the sector that has so far been devoid of any far sight.
The government, under the circumstances, must not only examine the proposal and discuss, with all stakeholders, its merits and demerits as well as the impact of any such increase on the national economy, it must also see that everything happens in the way the process should demand of the government. The government, to tackle its challengers in the coming days, must also realise that it needs to invest more in the exploration of indigenous oil and gas.

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