Proposed gas price hike poses a threat to industrial growth

The nation’s entrepreneurs and industrialists face escalating challenges as conditions deteriorate. Already burdened by dollar shortages, import restrictions, rising interest rates, declining law and order, and unresolved legal disputes, they now confront a staggering proposal to raise industrial gas prices by up to 152%, nearly 2.5 times the current rate.

Industries are already struggling with insufficient gas supplies at current rates, and the proposed hike has triggered widespread concern among entrepreneurs, who foresee devastating consequences for the industrial sector. 

Industrialists warn that such a steep price increase would halt the establishment of new factories, render the sector unsustainable, and deter both local and foreign investments. This could shrink export-oriented industries, reduce employment opportunities, and stifle industrial growth, pushing the sector toward contraction.

The industrial sector is already reeling from political instability, market volatility, soaring interest rates, raw material shortages due to LC (Letter of Credit) constraints, labor unrest, and diminished production. Many factories have shut down following mass protests in July, and those still operating face existential threats. Industry leaders caution that a drastic gas price hike would exacerbate these challenges, driving the sector closer to collapse.

Currently, industrial consumers pay Tk30 per cubic meter for gas, while captive power users pay Tk30.75. Under Petrobangla’s proposal, these rates would rise to Tk75.72 per cubic meter. New connections would be billed entirely at the new rate, while existing users might receive partial concessions.

Entrepreneurs highlight that industrial gas prices were raised by 150–178% just two years ago to ensure uninterrupted supply, yet chronic shortages persist. Many factories have already closed due to inadequate gas availability. They argue that the proposed hike would further discourage industrial investment and cripple production.

Moinul Islam, Vice Chairman of Monno Ceramics Industries and President of the Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA), criticized the proposal, stating, “The industrial sector is paralyzed by the gas shortage. Increasing prices in this situation defies logic. Gas is essential for our ceramic industry, yet low pressure limits production to less than half capacity. This decision undermines national interests and jeopardizes the future of our sector.”

Anwar-ul-Alam Chowdhury, President of the Bangladesh Chamber of Industries (BCI), warned, “The government’s focus seems to be shifting from manufacturing to the service sector, which is a flawed approach for a densely populated country like ours.”

Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), added, “If this proposal is enacted, industrialization will stall. New investments will dry up, and even at current rates, we struggle to compete internationally. Adequate gas supply is crucial, but demand far exceeds supply, severely disrupting production.”

Petrobangla reported excess gas consumption of 1.478 billion cubic meters in industries and 576 million cubic meters in captive power generation from November 2023 to October 2024. The proposed pricing would apply the new rates to additional consumption in existing factories.

Experts warn that despite higher prices, gas supplies are unlikely to improve significantly. Domestic gas production is declining, and expanding LNG imports requires new terminals, which are years away. A previous LNG terminal construction agreement, made during the Awami League government, was canceled by the interim government.

Dr. Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), commented, “Even at higher rates, fuel security cannot be guaranteed. Entrepreneurs will pay in local currency, but the government needs dollars to import energy, and the dollar shortage remains critical.”

The proposed gas price hike risks becoming a flashpoint for Bangladesh’s struggling industrial sector, with far-reaching economic implications.