Published in The Financial Express on Tuesday, 1 September 2015.

Impact of hike in power and gas prices

Syed Jamaluddin

Many people believe that hiking of power prices is unreasonable. Side by side, gas prices have also been increased. One unit of power has gone up by 2.93 per cent. But price will not be increased for lifeline consumers (using below 50 units of power), irrigation and fertiliser companies. Price of per unit of gas has been increased by 26.29 per cent. Gas prices were last increased in September 2009. During the last five years price of electricity was increased six times. The representatives of the Consumers Association of Bangladesh (CAB) has said that increase in price of power was anti-people.

The Centre for Policy Dialogue (CPD) has said that it will have adverse impact on the economy and people’s life. Chairman of the Bangladesh Energy Regulatory Commission (BERC) pointed out that this has been done in the interest of the consumers. Power supply will be affected if price is not increased.

Government will have to provide subsidy of Tk 43 billion (4,300 crores) in the power sector in the current year in spite of price increase. Price of compressed natural gas has increased from Tk 30 to Tk 35. A number of political parties criticised goverment decision to increase gas and power prices when the price of oil has come down by 50 per cent in the international market. The government will earn Tk 41.21 billion (4,121crores) from price increase of power and gas. The lower- and middle-income people will bear the burden of price hike. Businessmen are saying that they are not getting uninterrupted supply of power and pressure of gas is low. In this context, price increase of power and gas will hit them hard.

It is said that money realised from price increase of power and gas will be utilised for project implementation. Because of falling oil prices, no subsidy is required for the gas and power sector. The government is earning profit from high price of fuel in the domestic market. This money can be spent for development projects.

There was no need for price hike of power and gas. State minister for power and gas has indicated that gas price may be increased one more time by December. He also said that price of oil will not be reduced in the domestic market.  The state minister said that in three years 70 per cent of gas will be converted into LPG (liquefied petroleum gas). Supply of gas through pipeline will have to be discontinued.

Cost of living of the common people will increase as a result of  hike in the prices of gas and power. Transportation cost will increase because of high price of CNG (compressed natural gas). Commodity prices will increase  because of rising production cost. The government was ill-advised for raising gas and power tariff. Price increase will be considered as positive if supply of gas and power is expanded. Competitiveness of our entrepreneurs in the global market will decrease because of high fuel prices in the domestic market vis-a-vis falling prices in the world market.

The partners of the government are unhappy about price increase of gas  and power. Jatiya Party and BNP (Bangladesh Nationalist Party) have taken a position against the government decision. Some leaders of Awami League have called for reconsideration of the government decision. This  will damage the image of the government. Left political parties have taken a position against the government decision. The price hike of natural gas and electricity would increase the cost of production and export business would lose its competitive edge.

Increasing the cost of doing business by hiking energy prices was unjust and illogical when the prices of all basic commodities and fuel have been dropping across the world. Road transport minister hinted at  higher transport fares against the backdrop of  hike in fuel prices.

The member factories of the Bangladesh Textile Mills Association (BTMA) are the biggest consumers of natural gas. They could supply 90 per cent raw materials for the knitwear and 40 per cent to woven sub-sectors with their current capacity. The garment makers would now purchase raw materials from foreign sources at cheaper prices and the domestic spinners, weavers and dyeing factories would be in trouble. China, India and Vietnam not only reduced energy prices several times over the last few months but also devalued their currencies. But in case of Bangladesh, prices of gas and power increased and the taka appreciated  against the euro and the US dollar.    So our export sectors have to face challenges further due to the latest move of BERC.

Domestic steel and re-rolling mills will face severe challenge due to hike in natural gas and power prices. The president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said although the price hike of gas and power would affect production cost, it would ensure continued supply of energy to factories. Protesting against the fuel price hike decision, the BNP demanded immediate end of the move. Raushan Ershad of Jatiya Party (JP) said increased gas and power tariff will have a negative impact on the poor and middle income people.

Worldwide oil prices have  come down to one-third. But Bangladesh has increased the price of gas and power. Gas price has gone up to 50 per cent. BERC could not put up an acceptable argument. It takes decision at the behest of the government. In the international market, oil price has come down to $40 a barrel from $120. Prices of oil, gas  and power have declined in many countries accordingly. But Bangladesh is walking to the opposite direction

Opposition politicians have demanded withdrawal of government decision of hiking gas and power prices.

The writer is an economist and columnist.




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