Gas price hike to slow industrial growth, deter investment: Business leaders, economists

Highlights:

• Gas price for new industrial connections raised from Tk30 to Tk40 per unit
• Captive power plants to pay Tk42 per unit — up from Tk31.50
• Industries exceeding approved gas load will face even higher tariffs
• Textiles, cement, steel, ceramics, and food processing to feel the brunt of the hike
• Business leaders warn of rising production costs and eroded competitiveness

The government's latest hike in gas prices — by as much as 33% for new industries and a sharp increase for captive power use — is likely to push up production costs across manufacturing sectors, potentially eroding Bangladesh's industrial competitiveness and discouraging fresh investment, business leaders and economists have warned.

Under the new pricing structure, captive power plants — widely used in the export-oriented manufacturing sector to ensure uninterrupted electricity — will now pay Tk42 per unit, up from Tk31.50. 

Industrial gas connections have also seen a steep rise, from Tk30 to Tk40 per unit. For new industrial connections approved after 13 April, the gas price has been raised by Tk10 per unit — a 33% jump.

The revised structure goes further: existing industries will now be penalised for consuming more than their approved gas load. Even those with promised industrial connections will be charged at a higher rate if their consumption exceeds 50% above the sanctioned load.

Terming the new structure "discriminatory," industry insiders say the impact will be particularly harsh for energy-intensive sectors such as textiles, cement, steel, ceramics, and food processing — many of which rely on captive power to maintain cost control and output consistency in the face of grid unreliability.

They have also urged the government to implement a unified gas pricing system.

Industrialists raise alarms

Industry leaders echoed these concerns, warning that the new pricing structure, which they believe is discriminatory, will hurt competitiveness and deter investment.

"This discriminatory pricing will significantly slow down industrial growth. The 33% hike will raise steel production costs by around 15%, which will certainly affect market prices," said Sumon Chowdhury, secretary-general of the Bangladesh Steel Manufacturers Association.

He also noted that industries using captive power will see costs rise dramatically. "They'll now pay Tk 42 per unit, up from Tk 31.50, which is a huge increase."

However, Tapan Sen Gupta, deputy managing director of BSRM, offered a slightly different take. "Most steel plants are operating at around 50% capacity right now, so the price hike won't have an immediate impact. But once demand rises, it will affect production costs and prices."

Mohammed Amirul Haque, managing director and CEO of Premier Cement Mills Ltd, said the industrial sector has already been struggling with sluggish growth for the past year. "This gas price hike will slow things down further, including job creation," he warned.

"It's puzzling that the government announced this hike just days after hosting an Investment Summit. If new industries are forced to pay more than existing ones, what's the incentive to invest?" he asked.

Belyet Hossain, former director of the BGMEA, also criticised the move. "The textile and dyeing industries will suffer under this new pricing. The readymade garment sector may be less affected, but other segments won't be spared."

Economists also see risks to growth, investment

Economists have raised alarms that the move may disrupt the level playing field between new and old industries, leading to investment uncertainty and slower GDP growth.

"The current investment climate is already under pressure. In the first six months of the current fiscal year, foreign investment was only $213 million, down sharply from $744 million during the same period last year," said Naim Hasan Chowdhury, an associate professor at the Department of Economics, University of Chittagong.

He also pointed to declining private-sector lending. "Private sector bank loan growth fell to 6.82% in February — the lowest in a decade. Between July and February, capital machinery imports declined by about 25%, and long-term industrial lending has also dropped," he said.

"Given this backdrop, a gas price hike will further discourage both local and foreign investment, impacting employment and overall economic momentum," Naim Hasan added.

Noting the inflationary risks, Alauddin Majumder, a professor at the CU Department of Economics, said, "Higher gas prices will increase production costs, which will translate into higher product prices and inflation."

He called for a unified pricing system to prevent discrimination and ensure a fair, competitive environment.

Gas supply crunch hits Ctg amid price hike

While prices have gone up, the gas supply in Chattogram has been cut. Karnaphuli Gas Distribution Company Ltd (KGDCL) has already halted supply to the state-run Chittagong Urea Fertiliser Limited (CUFL) due to a shortage of LNG.

Officials say LNG imports from the global market have slowed, reducing daily supply from the Maheshkhali terminal from 1,000 million cubic feet to just 750 million. To meet the increased summer electricity demand, more LNG has been diverted to the Dhaka region, worsening shortages in Chattogram.

Bangladesh's total daily gas demand is 4.1 billion cubic feet, while Petrobangla can supply only 2.55 billion — about 62% of the requirement. Around 25% of the supply comes from imported LNG.

Chattogram, which relies entirely on imported LNG, has a daily demand of 400 million cubic feet, but the current supply ranges from 280 to 320 million cubic feet. With no access to gas from domestic fields in Sylhet or Cumilla, the region faces heightened vulnerability.

An Energy Division official, requesting anonymity, confirmed that diverted LNG has been used to boost power generation. "With summer's arrival, the government is prioritising electricity generation," the official said.

Currently, only the Shikalbaha thermal power plant in Chattogram receives around 30–35 million cubic feet of gas daily. Until new LNG shipments arrive, gas pressure will likely remain low, affecting CNG refueling stations, industries, businesses, and households.

Call for unified pricing

Industry leaders have urged the government to implement a unified gas pricing system to eliminate unfair advantages and restore investor confidence.

"This dual pricing model will burden new investors and dampen FDI, particularly in gas-reliant industries like steel, cement, glass, and fertilizer," said BSRM's Tapan Sen Gupta.

As Bangladesh strives to boost industrial growth and attract investment, stakeholders stress that energy policy must be fair, predictable, and supportive of long-term economic goals.