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Will there be another hike in gas prices?

  • Published at 01:05 pm February 20th, 2018
  • Last updated at 01:06 am February 21st, 2018
Will there be another hike in gas prices?
The price of natural gas in Bangladesh is likely to go up again in tune to international price hikes. The Bangladesh government wants the new price to come into effect in April, when they start importing liquefied natural gas (LNG). By hiking the price, the government aims to stop paying subsidies for gas. However, the gas price hike will increase the costs of electricity and industrial manufacturing. Energy and Mineral Resources Division Secretary Nazimuddin Chowdhury held a meeting with the Bangladesh Energy Regulatory Commission (BERC) to discuss the price hikes on Monday, a member of BERC confirmed. BERC member Abdul Aziz Khan said: “Officials from the Energy Ministry came to talk about adjusting gas prices. However, it is not possible for the BERC alone to increase prices. "This is a matter of protocol. If the distribution companies send a proposal, it will be assessed and evaluated.” When asked about the upcoming price hike in April, he said “It is not possible to discuss future price hikes now; not until the distribution companies have sent in their pitches.” Sources present in the meeting said the Moheshkhali floating LNG terminal, which was built by Accelerate Energy, will begin production on April 25 and the price hikes will correspond with this. The meeting was attended by Secretary Nazimuddin and BERC Chairman Monowar Islam, along with high officials of the Energy Division. However, sources did not disclose further details regarding the matter. BERC increased the gas price twice in 2017. The two-step increase came to an effect from March 1 and June 1, hiking the prices by an average of 22.73%. In 2017, the Energy Division formed a committee to determine and set a price for LNG. With BERC member Rahman Murshed as convener, a six-member committee was formed with representatives from the Energy Division, Petrobangla, Bangladesh University of Engineering and Technology (Buet), Institute of Business Administration (IBA), and the Department of Explosives. The committee said the government will need a lot of money to import LNG and to meet these expenses, the gas price can be increased every year and a fund can be created with the extra revenue. Moreover, the committee stated that it is important to waiver VAT and other supplementary taxes imposed on LNG. The committee report said currently consumers pay $2.17 for every thousand cubic feet of gas. On the other hand, the price of every thousand cubic feet of LNG is $8, with an additional $0.50 required to turn it back into gas. The report said the price goes up to $23.11 when import and advance income taxes, terminal, transmission and distribution charges, supplementary taxes, and VAT are added. After taking away supplementary duties and VAT charges, the price of LNG stands at $10.40, which is over $8 more than the local gas price right now. In light of this, the committee also suggested that the two fuels be mixed. In that case, the price of this combination will stand at $4.35. In order to maintain the costs, the committee plans to increase the price of local gas by at least 2% every year. Wishing anonymity, a BERC officer said: “The government has decided to import LNG to combat the gas crisis in the country. LNG costs considerably more than gas in Bangladesh. "As a result, gas prices must be adjusted when the LNG import begins. BERC cannot increase the prices as they please, but the distribution companies can propose increments. The officer said: "However, not all proposals will be accepted as a lot of factors are involved with it. The proposal will be assessed and a public hearing will follow. Only a subsequent consensus will allow for a positive decision." Regarding the matter, fuel expert Shamsul Alam said: “The government is planning to import LNG to combat the fuel crisis but it is not possible to use this gas in households. "It is being brought in solely to cater to the needs of businesses and industries. Making general public to pay for gas which will be used by industries is utterly unacceptable.” This article was first published on banglatribune.com
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