Immediate hike in gas prices unlikely

“Despite a proposal from BERC, the govt's highest policymaking level has decided not to increase prices of gas for now”

The government is not likely to increase gas prices this year as such a decision would go against the interest of the people, a highly placed source at Petrobangla told The Independent yesterday. In March, the Bangladesh Energy Regulatory Commission (BERC) held a four-day-long public hearing on the proposed gas price hike. It has already completed all necessary paperwork to make its final observation about the gas price hike proposal.

The Petrobangla source, however, said that despite the BERC’s observation and the proposal for a gas price hike, the government's highest policymaking level has decided not to increase gas prices for now.

During the last BERC hearing on a gas price hike, Petrobangla chairman Ruhul Amin said the hydrocarbon agency would have to face a huge deficit in the account once it moves for the import of 1,000 mmcfd LNG (liquefied natural gas) to meet the country’s gas shortage.

“So, it’s essential to raise gas prices to offset the loss,” the Petrobangla chairman told the public hearing, making his appeal to the energy regulator to raise the gas tariff to Tk. 9.55 per cubic metres from the existing tariff of Tk. 7.17. In its proposal, Petrobangla said the mother body has been purchasing each unit of gas from different upstream gas production companies at an average rate of about Tk. 6.50, while each unit of LNG will cost Tk. 39.82. Currently, Petrobangla is importing some 500 mmcfd (million cubic feet per day) against a shortage of about 1,000 mmcfd, while the current gas supply is 3,100 mmcfd.

The highly placed source told The Independent that the government has recently given a subsidy of Tk. 1,000 crore to Petrobangla to compensate for the extra cost imposed on it due to the import of LNG.

With this amount, the government has subsidised the state-run petroleum agency for the first time since the beginning of the LNG import that commenced in August last year.

Petrobangla insiders said that in October 2018, they asked for a subsidy of Tk. 5,400 crore for FY2018-19 to the finance ministry, but no subsidy was given to them until last March.

Petrobangla director (finance) Harunur Rashid said that Petrobangla had a deficit of Tk 3,000 until March this year. However, the

recent subsidy will only cut the deficit by one-third. The import volume of LNG is likely to increase by a margin in the near future, so the deficit of Petrobangla is also likely to rise.

The deficit must be compensated by raising the price of gas and giving more subsidies to the sector, said Rashid.

Another Petrobangla source told The Independent that for importing LNG, another Tk 3,000 crore was sourced from the Energy Security Fund (ESF) and Tk 2,000 crore from the sales of LNG to distributors.

Meanwhile, on April 1, the High Court (HC) observed that there would be no need for a gas price hike if corruption in Petrobangla and Titas could be halved. The HC’s observation came during the hearing of a petition filed by the Consumer Association of Bangladesh (CAB) seeking a stay on the BERC hearings on the proposed gas price hike on February 27.

The CAB argued that the BERC was holding the hearings between March 11 and March 14 even when a previous HC bench was yet to pass orders on a set of rules on the hiked prices of gas set by the commission on October 16 last year.

The association alleged that the authorities concerned did not follow the rules to raise gas prices and the hike in reality aims to benefit a certain quarter. Referring to the BERC Act, CAB energy adviser Pro.f Shamsul Alam told The Independent it is totally illegal to hold a public hearing on a gas price hike within the same fiscal year of 2018-19 when the commission passed its order on October 16, 2018. He said a similar hearing was scheduled to take place between June 11 and June 21 last year. But the government had backtracked from hiking gas prices, considering the situation ahead of the 11th general election.

“Now I would praise the government if it comes to sense and refrain from hiking gas prices this year. I don’t find any rationale behind a hike in gas prices just now,” he added.

 

Immediate hike in gas prices unlikely

“Despite a proposal from BERC, the govts highest policymaking level has decided not to increase prices of gas for now”

The government is not likely to increase gas prices this year as such a decision would go against the interest of the people, a highly placed source at Petrobangla told The Independent yesterday. In March, the Bangladesh Energy Regulatory Commission (BERC) held a four-day-long public hearing on the proposed gas price hike. It has already completed all necessary paperwork to make its final observation about the gas price hike proposal. The Petrobangla source, however, said that despite the BERCs observation and the proposal for a gas price hike, the governments highest policymaking level has decided not to increase gas prices for now. During the last BERC hearing on a gas price hike, Petrobangla chairman Ruhul Amin said the hydrocarbon agency would have to face a huge deficit in the account once it moves for the import of 1,000 mmcfd LNG (liquefied natural gas) to meet the countrys gas shortage. So, its essential to raise gas prices to offset the loss, the Petrobangla chairman told the public hearing, making his appeal to the energy regulator to raise the gas tariff to Tk. 9.55 per cubic metres from the existing tariff of Tk. 7.17. In its proposal, Petrobangla said the mother body has been purchasing each unit of gas from different upstream gas production companies at an average rate of about Tk. 6.50, while each unit of LNG will cost Tk. 39.82. Currently, Petrobangla is importing some 500 mmcfd (million cubic feet per day) against a shortage of about 1,000 mmcfd, while the current gas supply is 3,100 mmcfd. The highly placed source told The Independent that the government has recently given a subsidy of Tk. 1,000 crore to Petrobangla to compensate for the extra cost imposed on it due to the import of LNG. With this amount, the government has subsidised the state-run petroleum agency for the first time since the beginning of the LNG import that commenced in August last year. Petrobangla insiders said that in October 2018, they asked for a subsidy of Tk. 5,400 crore for FY2018-19 to the finance ministry, but no subsidy was given to them until last March. Petrobangla director (finance) Harunur Rashid said that Petrobangla had a deficit of Tk 3,000 until March this year. However, the recent subsidy will only cut the deficit by one-third. The import volume of LNG is likely to increase by a margin in the near future, so the deficit of Petrobangla is also likely to rise. The deficit must be compensated by raising the price of gas and giving more subsidies to the sector, said Rashid. Another Petrobangla source told The Independent that for importing LNG, another Tk 3,000 crore was sourced from the Energy Security Fund (ESF) and Tk 2,000 crore from the sales of LNG to distributors. Meanwhile, on April 1, the High Court (HC) observed that there would be no need for a gas price hike if corruption in Petrobangla and Titas could be halved. The HCs observation came during the hearing of a petition filed by the Consumer Association of Bangladesh (CAB) seeking a stay on the BERC hearings on the proposed gas price hike on February 27. The CAB argued that the BERC was holding the hearings between March 11 and March 14 even when a previous HC bench was yet to pass orders on a set of rules on the hiked prices of gas set by the commission on October 16 last year. The association alleged that the authorities concerned did not follow the rules to raise gas prices and the hike in reality aims to benefit a certain quarter. Referring to the BERC Act, CAB energy adviser Pro.f Shamsul Alam told The Independent it is totally illegal to hold a public hearing on a gas price hike within the same fiscal year of 2018-19 when the commission passed its order on October 16, 2018. He said a similar hearing was scheduled to take place between June 11 and June 21 last year. But the government had backtracked from hiking gas prices, considering the situation ahead of the 11th general election. Now I would praise the government if it comes to sense and refrain from hiking gas prices this year. I dont find any rationale behind a hike in gas prices just now, he added.