Gas shortage, power cuts hit factories

A deepening energy crisis is hitting industries in Bangladesh hard, forcing them to cut production by as much as 50 per cent as escalated import bills have forced the country to lower gas purchase from international sources.  

Compared to May 2021, there has been 65 per cent increase in fuel price in May this year, according to the budget document of the government. 

Similarly, liquified natural gas (LNG) prices have hit record levels internationally, fueled by higher energy prices in the global markets exacerbated by the Russia-Ukraine war.

Since the government has decided, for the time being, not to buy LNG from the international spot market, gas supply has fallen since June 30 amid lower domestic production.

This has hit the generation of electricity in a country where power production accounts for around 70 per cent of the total gas consumption.

As a result, the industries and businesses in Bangladesh are in trouble since production halved while the cost of production is rising.

"We have suggested the government enforce load-shedding to save energy bills but the supply should be given to industries on a priority basis," said Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

"But the load-shedding and gas crisis are taking place across the industries. As a result, businesses are incurring losses amid the production fall."

Consumers, individuals, industries and businesses alike, have been enduring severe power cuts for the last few days as electricity production was hampered mainly due to a shortage of gas supply.

This prompted the FBCCI to urge the government yesterday to go for power rationing.

The Bangladesh Power Development Board and other power and gas suppliers need to sit together as soon as possible to determine the priority when it comes to enforcing power cuts and gas rationing, said Jashim.

"Industries and other vital services sectors like hospitals should be prioritised and remain out of the purview of load-shedding and gas rationing."

Owing to the severe gas crisis, the production in the spinning and weaving mills in the industrial zones has halved in the past 11 days.

The millers are worried about whether they would be able to keep their production up and running amid the deepening energy shortage.

Any hamper in production at primary textile mills means a delay in garment manufacturing which will ultimately compel producers to go for costlier air shipment of goods or face a big discount from international retailers and brands or in the worst case, the cancellation of work orders, industry insiders say.

As a result, the whole supply chain will suffer and work orders may shift to other countries from Bangladesh, millers and exporters warned.

Israq Spinning Mills Ltd's production has declined by 60 per cent recently.

On a normal day when the gas supply remains stable, the factory can produce 125 tonnes of yarn, said Md Fazlul Haque, managing director of the company located in Gazipur.

Like others, Haque begins the operation of his mills after 10:00pm when gas pressure increases a bit.

Md Masud Rana, managing director of Asia Composite Mills in the same industrial belt, says production has fallen by 50 per cent because of the shortage of gas.

Savar-based Little Star Spinning Mills Ltd normally produces 12,000 kilogrammes of high 60 to 80-carded yarn daily. Now, the production has fallen to 4,500 kg since it runs the operation at night alone.

"Many mills have zero flow of gas and thus no production," said Khorshed Alam, chairman of the company.

A weaver at Narsingdi says his factory, which at its peak can manufacture one lakh yards of fabrics daily, is running at half of its capacity.

As a result, he is failing to supply fabrics to his customers on time and is fearing a huge loss.

"We will lose our buyers if the gas supply situation does not improve soon," he added.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, said the gas crisis would affect the whole garment supply chain.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, said almost every mill is running at losses because of the disruption in gas supply.

Khokon pointed out that when the gas tariff was hiked recently, it was committed that both supply and pressure would improve.

"The situation has rather worsened. Factory and mill owners are complaining that they can't operations because of the lower pressure of gas."

The power cuts are not totally unexpected.

For example, shopping centres and stores were shut at 8:00pm every day from June 21 to June 30, instead of 10:00pm, as the government looks to conserve power and energy amid the rising prices in the global market.

The restriction has been loosened owing to the Eid festival and is said to be reinstated from July 10.  

"It is a very difficult situation," said Aameir Alihussain, managing director of BSRM, one of the largest steel mills in Bangladesh.

Steel manufacturers are already facing increased import costs for the deprecation of the taka against the US dollar and higher prices of ingredients of steel in the global market.

"We are already incurring losses. The energy crisis will widen our losses," said Alihussain.

"Although it has become necessary for the country, power cuts should be kept at a minimum level for industries. Otherwise, the wheels of the economy will slow down."

The situation is particularly tough for factories like BSRM that do not have captive power plants, which use gas to generate power for their own consumption to avoid sudden power failures.

"The government should ensure a level-playing field between factories that have captive power plants and factories that do not have," Alihussain said.

Mohammed Amirul Haque, managing director of Premier Cement, says they have already been suffering from a gas crunch.

"Now, power cuts have been added to the challenges. It will accelerate the cost of production as it takes a couple of hours for a heavy machine to restart," he said, adding that there will be a 20-25 per cent production loss.

Md Helal Uddin, president of the Bangladesh Shop Owners Association, said they have accepted the government's decision to ration power supply in view of the energy shortage and high subsidy bills for petroleum.

"We are complying with the decision but we are suffering. We would urge the government to ration power supply to all types of consumers in a staggered manner."

The crisis is not limited to gas shortage alone.

For example, spinners and millers have bought cotton at higher prices from international markets.

"If they can't run their mills, almost all of them will incur losses. The interest on bank loans will accumulate if they can't pay instalments on time," said Asia Composite's Rana.

"Many buyers will pull out of Bangladesh if they don't receive shipments within the stipulated time. If factories remain shut, workers will lose jobs and millers will go bankrupt."

The entrepreneur urges the government to keep supplying gas to the industrial units even at higher prices.

"If the industrial units remain operational, the shipment will take place on time and Bangladesh will earn much-needed foreign currencies. Everybody should calculate the impacts of lower production or closure of industries."