Gas price increase not reasonably well grounded

Published: 00:00, Jul 02,2019

 
 

THE government, after public hearings that took place three and a half months ago, increased gas prices by 32.8 per cent on an average for all consumers taking effect on the first day of the 2020 financial year amidst consumer opposition. The Bangladesh Energy Regulatory Commission increased the price of a cubic metre of gas to Tk 9.80 from Tk 7.38 to make up for an estimated deficit of Tk 18.3 billion in the financial year, with 46 per cent coming from the price increase, 41 per cent from the government in the form of subsidy and 13 per cent from the Energy Security Fund. The commission explained the rationale for the price increase saying that the gas production, distribution and transmission companies wanted it because of an increase in production cost caused by the import of liquefied natural gas that started taking place towards the end of 2018. The price increase will certainly, in one way or the other, affect all the people in several forms such as increased transport and utility costs but this will directly affect about 4.28 million, out of about 4.31 million gas consumers, who use gas for domestic purposes although in a much less volume.

A situation like this will hit hard the poor and people of fixed and middle income as the national budget for the 2020 financial year that has just been passed has provisioned for favour for the rich and punishment for the poor by way of not increasing the tax-free minimum income ceiling and not rationalising the direct tax regime. The reasons that the commission puts forth also seem to be untenable compared with arguments that came up in public hearings in March. The deficit that the commission talks about is set against the supply of about 1000mmcfd or at least 850mmcfd of gas, which has been in conversations for about a year, but as of June, as it came up in the hearing and at the time of price increase announcement, the supply hovers around 650mmcfd, leaving government to charge people for the deficit that has yet to come in its full force. It has often been reported that 10 per cent or more of the gas produced is lost to what is called systems loss, which speaks of corruption in the process but has never been adequately attended to. Experts also believe that if the government had spent money on gas exploration in time, the government might not have needed to import expensive liquefied natural gas at prices said to be more than what they are on the international market. Besides, a price increase on the international market has always had an effect on prices on the domestic market, but it has almost never had any effect in the event of price decline on the international market. The commission also seems to have messed with the structure as it increased prices so that the subsidy comes down but it has increased gas price for the fertiliser sector by 65 per cent, which would require the government to increase the subsidy.

The commission’s chair on Sunday sought to say that it was bound by the law to consider price increase proposals of gas companies — reported to have been making less profit, not losses, during hearings — but it should also be legally obliged to consider the plight of people that a price increase could cause. The government must, therefore, review the increase and adequately attend to corruption, inefficiency and other problems that the production, distribution and transmission of gas are mired in.

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