Apparel-makers worry as gas price hike doesn’t guarantee smooth supply

With a letter seeking consistent gas supply to more than 300 factories in Gazipur industrial belt, textile millers were scheduled to meet gas distributor Titas' boss on Thursday. But a 179% gas hike yesterday afternoon caught them by utter surprise.

According to the manufacturers, the abrupt jump in gas price, following the recent power traffic hike, will eat into the profit margin amid the global business downturn and an energy crunch at home.

"The hike has almost doubled my monthly gas bill to Tk6 crore, while I cannot pass the additional costs on to the buyers for orders taken six months ago," Kutubuddin Ahmed, founder of the country's one of leading apparel exporters Envoy Textile Mills, told The Business Standard on Wednesday evening.     

The last gas price hike was in June last year. But the adjustment, unlike this time, followed a regulatory process, stakeholders' involvement and public hearing.   

Without any prior notice, Kutubuddin Ahmed said the latest 179% gas hike will cause a huge impact to everyone as they received the apparel orders from Western buyers a couple of months ago. 

He called for some sort of relief measures by the government, such as withdrawal of 1% AIT (advance Income tax) on industries or increasing cash incentive for the readymade garment exporters.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said they seemed to be in an endless troubleshooting stretch just one after another.

"With the recent power tariff hike, it was not logical to hike the gas price this much. This will be a big challenge for the industrial sector, while exporters will lose their competitiveness in the global market," he told The Business Standard.

Rather than tariff adjustment to reduce energy subsidies, he believes the authorities could have focused on minimising the system loss.  

Sharif Zahir, managing director of Ananta Group, said the gas hike will escalate apparel sector utility up to 8% from current 3%-4%. "It will hit our profit margin as many factories are now running with 15%-20% of the production capacity sitting idle due to the global economic slowdown." 

Besides, there is no scope for price negotiation with the buyers now, he said, adding, "Gas will now cost us as much as diesel".

"The abrupt hike put us in an embarrassing situation," Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), told The Business Standard. 

"This announcement came at a time when we are facing numerous challenges due to inconsistent gas supply. The hike doesn't guarantee any supply improvement either," he added.   

Shams Mahmud, managing director of Shasha Denims Ltd, said, "We understand the government cannot give us subsidies forever. But we have not been provided with a long-term energy price roadmap either so that we could formulate our plan beforehand."

"This will have a detrimental effect on FDI [foreign direct investment] and also private sector credit growth," Shams told The Business Standard.