Industrial gas price hiked 33%, businesses fear added cost pressures

Highlights:

• Prices for new captive power plants hiked to Tk42 per cubic metre – up from Tk30
• For industries, prices for new consumers hiked to Tk40 per unit – up from Tk30
• Gas prices for industries and power shot up by up to 179% in 2023
• Industries consume 19% of total gas, captive power 18%
• System loss exceeds 13% in the gas sector

At a time when Bangladesh is striving to attract foreign investment and revive industrial growth, the country's energy regulator has raised gas prices for new industries and captive power users – a move business leaders and energy experts fear could derail the government's broader economic goals.

The Bangladesh Energy Regulatory Commission (BERC) today announced a 33% increase in gas prices for new consumers and existing users expanding beyond 50% of their sanctioned load. The new tariff – effective from today– raises the rate from Tk30 to Tk40 per cubic metre for both industrial use and captive power generation.

With this adjustment, new industrial consumers and those scaling up production will now have to pay Tk10 more per unit of gas, adding fresh cost pressures amid a volatile macroeconomic environment marked by high inflation, weak credit growth, and declining investment.

Wrong signal, right after investment summit

The gas price hike comes just a few days after an investment summit ended, where policymakers projected a pro-business image to lure in foreign direct investment. The timing of the price hike, however, has prompted criticism from both the private sector and energy experts.

"The government is actively seeking new investments, as evidenced by the recently held summit. But increasing gas prices sends a conflicting message," said Saleudh Zaman Khan Jitu, vice president of the Bangladesh Textile Mills Association (BTMA) and managing director of NZ Textiles Limited.

Jitu pointed out that global energy prices remain low, and during the BERC hearing in February, no compelling justification was offered to support the price increase. "If the policy remains unchanged regardless of the government, investors will start questioning what has changed," he added.

The private sector, already hit by rising interest rates, a depreciated currency, and supply chain disruptions, see the gas tariff revision as another blow. Taskin Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI), said the decision comes at a time when private credit growth has dropped below 7%, the lowest in a decade.

"The gas price hike will further discourage industrial investment, especially when entrepreneurs are already under pressure from high borrowing costs and inflation," Taskin said.

He also highlighted a persistent mismatch between gas prices and supply quality. "Even after the price hike, industries are not getting the required gas pressure. So, they're being penalised without the benefit," he said.

While acknowledging the need for fiscal adjustments, Taskin urged the government to offset the impact by streamlining other aspects of doing business – including faster project approvals and simplified regulations.

Both businesses said the ripple effect of the industrial slowdown is already visible in the trade data. Capital machinery imports, a key indicator of investment sentiment, fell by 25% during July-February of FY25, reflecting a shrinking appetite for industrial expansion.

Speaking with The Business Standard, Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association President Md Shahriar said the hike in gas prices would create discrimination between old and new investors.

"This is completely contradictory to the government's policy of attracting new investors," he added.

"At the last investment summit, the government invited investors to invest in Bangladesh – so how can they now increase gas prices?" he asked.

Shahriar said, "Many investors, including myself, had planned to make new investments, but now they have to reconsider due to the price hike, as they will face uneven competition with existing investors."

Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), said Bangladesh has sufficient gas reserves, but the authorities have never taken the initiative to drill new wells.

"Instead, they have become reliant on importing LNG, which has essentially enriched an oligarchic clique – a path the previous government pursued," he added.

He complained that the current government appears to be following the same course. "Now, it must decide: will it allow the country's industries to collapse, or will it take steps to support and advance them?"

He noted that the previous government created a high dependency on India for many sectors, including energy. "We wanted to overcome that dependency, as India does not believe in win-win bilateral or diplomatic relationships."

Opposing the gas price hike, he said that the increase is unacceptable under any circumstances. "On the contrary, the price should be brought down to around Tk20 now."

"BPC, Titas, and similar agencies are operating with a profit-first mindset, but their activities are benefiting neither consumers nor industries," he added.

Regarding the recently held investment summit, he said energy assurance is the foundation for attracting foreign investment.

"But how can we expect investors to come when we are raising gas prices yet again?" he questioned, warning that such hikes would discourage new investments and hinder employment generation.

"If the government could recover laundered money, it could easily address the ongoing energy crisis," he added.

Legal formality vs economic rationale

The new pricing decision came after a mass hearing on 26 February, as the BERC is legally bound to issue a verdict within 60 days. However, critics argue that legal timelines should not override economic imperatives.

"The revenue expected from this price hike is insignificant," said energy expert Dr Ijaj Hossain, adding that "without sufficient gas supply, the higher tariff only adds to the burden on industries without solving the core issue."

Dr Ijaj also flagged system loss, which exceeds 13% in the gas sector, as a more urgent area for policy action. "Reducing system loss could save billions. That should have been the focus, not hiking prices."

Gas price hiked up to 179% in 2023

The current hike follows a sharp upward revision in January 2023, when gas prices for industries and power were increased by up to 179% as part of the then government's effort to curb subsidies and reduce the fiscal deficit.

That revision, effective from February 2023, set gas prices at Tk14 per cubic metre for power generation, and Tk30–Tk30.5 for industries and commercial establishments.

With the latest hike, energy costs for businesses have risen again — this time, under a new political leadership that had promised to prioritise investment and jobs, businesses say.

According to the Petrobangla MIS Report, 2022, industries consume 19% of the natural gas produced locally and imported LNG. Among other users, the power sector uses 40%, captive power 18%, fertilizer 6%, domestic 13%, CNG 4% and others (commercial and tea estate) uses 1% of the gas