Why are factories so dependent on gas?

Bangladesh's gas shortage has left at least Tk35,000 crore in private industrial investment idle, with many factories unable to begin production despite being completed or near completion.

As businesses continue to wait for gas connections, questions are growing over why alternative energy sources cannot easily replace natural gas in the country's industrial sector.

Industry experts say decades of infrastructure development, cost considerations and power reliability concerns have made gas the dominant energy source for manufacturing.

Bangladesh's industrial sector was built around natural gas, which has long been considered the cheapest and most reliable fuel for large-scale production.

Over the years, factories invested heavily in equipment and systems designed specifically to run on gas, making a rapid shift to alternative fuels difficult and costly.

Gas plays two key roles in industrial operations – providing heat for manufacturing processes and generating electricity through captive power plants.

Industries such as textiles, cement, ceramics, food processing and seed crushing depend on gas-fired boilers to produce the high temperatures needed for production at comparatively low cost.

Many factories also rely on gas-powered captive power plants because of concerns over uninterrupted electricity supply from the national grid.

Although alternatives such as diesel and liquefied petroleum gas (LPG) are available, businesses say they are significantly more expensive.

Diesel can be used in boilers and generators, but industry experts estimate that operating costs can be two to three times higher than gas, reducing competitiveness in energy-intensive sectors.

"Even after the gas price hike, captive power remains cheaper," said Abul Kalam Azad, a consultant in the spinning sector.

In January 2023, the government increased captive gas tariffs to Tk30 per cubic metre from Tk16, while some users saw rates rise from Tk11.98 to Tk30 per cubic metre.

Despite the increase, Azad said gas remains cost-effective because one cubic metre can generate about 3 kilowatt-hours of electricity at a cost of roughly Tk10 per unit, which is still lower than the average grid electricity tariff of around Tk11 per unit.

He also noted that imported liquefied natural gas (LNG) costs around Tk100 per unit, while industries pay Tk30, indicating that the government continues to provide substantial support to the sector.

LPG can replace gas in some heating applications, but experts say it is not a practical solution for large-scale industrial operations because of higher costs and supply uncertainties.

Industry representatives argue that the lack of viable alternatives explains why hundreds of factories continue to wait for gas connections despite years of delays, leaving billions of taka in investment idle and slowing industrial expansion.