Gas crisis deepens – factories forced to cut production, seek costly alternatives

Infographic: TBS

Highlights

• 400 gas-reliant factories are now operating at a fraction of their capacity
• An increasing share of gas is being diverted to power generation
• The crisis follows two steep gas price hikes in the past two years
• Factory owners fear the financial strain could make repaying bank loans impossible

As temperatures climb with the onset of summer, an increasing share of gas is being diverted to power generation. The impact has been severe for Bangladesh's industrial zones, where gas pressure has plunged – sometimes to zero – crippling production across Narayanganj, Dhamrai, Manikganj, and parts of Savar and Gazipur where an overwhelming number of export-oriented factories are located.

An estimated 400 gas-reliant factories, predominantly in the textile, ceramic, and steel sectors, are now operating at a fraction of their capacity. Many entrepreneurs report staggering financial losses as they continue to be billed for sanctioned gas loads – ranging from 7 to 15 PSI – while receiving only a fraction of that, if any.

"We're running at below 40% capacity, even after adjusting operations to night shifts and resorting to alternative fuels," said Md Nasir Uddin, managing director of Sadma Group, a prominent garment manufacturer in Gazipur.

"Our yarn production has fallen from 60 tonnes to just 10 tonnes a day," he told The Business Standard.

Desperate to keep operations afloat, factories like Sadma have resorted to costly substitutes – diesel, LPG, and compressed natural gas (CNG). However, these alternatives are both expensive and insufficient to bridge the widening gap in energy demand.

The crisis follows two steep gas price hikes in the past two years. In February 2023, rates soared by 179% with the assurance of an uninterrupted supply – a promise that was repeated when another 33% hike was imposed this April.

Yet factory owners insist that availability has only worsened, with no indication of improvement.

"The government raised gas prices despite our protests, and still, we don't receive supply," said Shovon Islam, managing director of Sparrow Apparels in Gazipur and a former director of BGMEA. "At times, we get barely two hours of supply in an entire day. Things have deteriorated further since Monday."

Manufacturers across multiple districts echo the same concerns.

"Our sanctioned pressure is 15 PSI, but for the past five months, it has been near zero," said Md Azhar Khan, chairman of Mithela Textile Industries in Narayanganj's Araihazar. "This level of disruption is unsustainable for any industry."

According to industry experts, at least 7 PSI is required to keep industrial machinery operational. However, current levels – often hovering between 1 and 2.5 PSI – are woefully inadequate.

To cope, factories are now purchasing CNG separately and even generating power from rice husk to sustain production.

"If we were receiving government-approved gas, our monthly energy expenses would be around Tk4 crore. At present, we're spending Tk9 crore," Azhar Khan stated.

A crisis at the worst possible time

The timing of the crisis couldn't be worse. The global industrial sector is already grappling with challenges, including ongoing US-China tariff conflicts, shrinking consumer demand, inflation, and rising interest rates.

Local entrepreneurs say these compounded pressures are pushing many businesses to the brink, threatening defaults, job cuts, and a severe industrial slowdown.

"There's only so much we can absorb," said Nasir Uddin. "If this situation persists, many factories may have no choice but to shut down – either temporarily or permanently."

With losses becoming unbearable, factory owners fear the financial strain could make repaying bank loans impossible.

At least 20 textile mills across Bangladesh are reportedly up for sale, driven by a combination of dwindling gas supply, falling global demand, and escalating production costs.

No immediate relief in sight

In Gazipur – one of the country's largest industrial hubs – factories require between 600 and 700 million cubic feet of gas per day (mmcfd).

However, supply is capped at just 450 mmcfd, according to Engineer Faruque, deputy general manager of Titas Gas Transmission and Distribution Company Limited.

"With demand far exceeding supply, the pressure naturally remains low," he explained.

According to Petrobangla, Bangladesh's total gas demand currently stands at 3,800 mmcfd, while supply remains at just 2,700 mmcfd.

Petrobangla Director Md Rafiqul Islam stated, "Previously, 1,050 mmcfd of gas was allocated to the power sector. During winter, demand was lower, so less gas was needed. Now that demand has increased, but supply remains stagnant, the gap has widened. Additionally, the ongoing dollar crisis has limited our ability to import gas."

Islam warned that the crisis is unlikely to ease until domestic production increases.

Still, he expressed some hope, noting that 28 mmcfd of gas from local sources could be added to the national grid by the end of the month, with further increases expected in May.

Textile industry in search of solutions

Entrepreneurs say production costs have skyrocketed in recent months due to multiple factors – including the abrupt doubling of gas prices in early 2023 and the subsequent implementation of a revised wage structure.

Textile mill owners argue that they are not receiving proportionate pricing for their products, making it harder to stay afloat.

According to the Bangladesh Textile Mills Association (BTMA), the sector consists of 1,854 factories, with a combined investment of approximately $22 billion. Of these, about 900 are gas-dependent.

Large-scale investments are crucial for textile factories – especially spinning mills, where capital requirements can range from Tk100 crore to over Tk1,000 crore. As a result, mill owners with substantial bank loans are growing increasingly anxious about their financial obligations.

Md Fazlul Hoque, managing director of Israq Spinning Mills, told The Business Standard, "We're currently operating at about 40% capacity. Our factory can produce 180 tonnes of yarn daily."

"I'm still managing to pay the bank instalments somehow, but if this continues, I won't be able to sustain it," he warned.

Saleudh Zaman Khan Jitu, managing director of NZ Textile, expressed his concerns: "I have no idea how we will manage workers' wages and other expenses before Eid."