Is the gas price hike justified?

On February 23, the government announced that gas prices will be increased by 22.7 percent on average, across the board, in two phases, starting from March 1. The government last increased the price back in September 2015 and, before that, in 2009 and 2005.

The major brunt of the latest price hike will be borne by household natural gas users, as their monthly payment will be increased by 50 percent —Tk. 950 from Tk. 650 for a double-burner stove and Tk. 900 from Tk. 600 for a single-burner stove — despite absorbing about 10 percent of the country's daily gas consumption only. Businesses too are expecting to be hit hard by the hike. According to a statement issued by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the hike "is likely to have a detrimental effect on the investment and industrialisation prospects of the country".

Expressing concerns about how it may obstruct the country's economic growth, the FBCCI said that it is "apprehensive" that the hike "will not only seriously affect the cost of the utilities but also increase the other associated costs of businesses", which, in turn, "will have the domino effect, leading to an even higher increase of general cost of living such as inflation, affecting every resident of the country". So the fact of the matter, in regards to the price increase, is, that whatever benefit (if any) the government seeks to extract, will actually be negated by its negative spill-over effects.

Why then is the government increasing gas prices so significantly? Mollah Amzad Hossain, Editor of Energy & Power magazine, says it is because the government "wants to discourage the use of pipe-gas for domestic use", as it is concerned about the current gas reserves running out around 2031. Ironically, however, while hiking the price of gas, the government is failing, according to experts, to take any serious action to redress its scarcity.

This failure becomes even more glaring in the face of a government commitment made in 1998 — that 55 percent of revenues generated from the sector would be used for operating and developing the country's gas sector. Simultaneously, it should also be taken into consideration that while businesses in Bangladesh will now have to deal with higher prices, businesses in countries like its next door neighbour, India, are enjoying lower prices following four consecutive price cuts, fuelled by a decline in the global market price.

Back to the shortage of gas reserves, Professor Badrul Imam, Department of Geology, University of Dhaka, writes that "Gas exploration in Bangladesh has not reached a mature stage and therefore the presently known reserve is not necessarily a reflection of the true gas potential of the country" (Tackling our gas crisis, The Daily Star, February 23). Given that the government has carried out "minimum" exploration drives over the last decade, he says that "it appears that Bangladesh's gas depletion alarm is perhaps overly played" as without carrying out "serious exploration", it is "not justified to comment on how much reserve growth could be achieved".

Meanwhile, wastage of gas and inefficiencies in its use still contribute significantly to its quick depletion. Currently, the overall efficiency of all power plants in Bangladesh generating electricity from gas is a meagre 33 percent (Ways to increase energy efficiency, The Daily Star, February 23). According to the most recent energy efficiency study in Bangladesh — Intended Nationally Determined Contributions (INDC) — "replacing steam turbine power plants by Combined Cycle Gas Turbine" could increase electricity generation by "50-60 percent" using the "same quantity of gas". Yet, no such plan seems to be in the pipeline.

Moreover, the Bangladesh Energy Regulatory Commission (BERC), when it increased retail prices of natural gas in 2015, had to instruct distribution companies to stop waste and unplanned use of natural gas, install prepaid metres and stop all illegal gas distribution networks. Disappointingly, however, in August 2016, the former BERC chair had to admit that efforts to comply with the directives by distributors were not as expected.

Amidst all these failures by the authorities, that is, the government, is it fair that businesses and ordinary citizens in general, should have to pay such high amounts for gas and electricity consumption? With fears of gas depleting by 2031 looming large, why is the government not exploring to discover more gas reserves on an urgent basis? And even if exploration projects are not successful, why is the government not pressing to reduce the massive waste and inefficiencies that, one could argue, are having a much bigger impact on the depletion of our gas reserves, than the use of gas for domestic purposes?

The truth is, one could only speculate what the answers to these questions really are. It could very well be that there is has no long-term strategy in regards to the country's energy generation and so short-sighted decisions are being made. Another answer could be that there is a lack of political will to put in the hard work of removing the corruption that is widespread in the energy sector, and thus the easy way out is to simply charge consumers more for gas consumption. Whatever the answer really is, the one certainty clearly visible is that the recent price hike is not only unfair, but is completely counterproductive and may well be detrimental for the country going forward.

The government should thus not move forward with the price hike. Instead, it should look to guarantee the nation's energy security the right way — by reducing corruption in the energy sector and by formulating policies such as increasing gas explorations, or by slowly moving to other alternatives in ways which do not run against the interest of the public or businesses.

The writer is a member of the editorial team at The Daily Star.