Industrial and captive power connections would soon have to pay a much higher tariff for gas usage after the ministry of power, energy and mineral resources decided in principle to implement a new pricing structure to reflect the fluctuating global market.

Instead of a fixed rate, the new pricing structure will be based on the actual cost of imported liquefied natural gas (LNG).

In line with the decision, Petrobangla yesterday submitted a proposal to the Bangladesh Energy Regulatory Commission (BERC) to revise gas prices for industrial and captive power users.

If the BERC accepts the proposal, industrials and captive power users -- which refers to self-generated, gas-fired electricity within industries -- would have to pay Tk 75.72 per cubic meter for their gas use beyond the sanctioned load. At present, they pay a flat Tk 30.75 per cubic meter even if they breach their sanctioned load.

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Power, gas to get pricier next month

However, new industrial and captive connections will have to pay Tk 75.72 per cubic meter throughout.

Those who got the primary approval for new connections will have to pay 50 percent of their bills of sanctioned load at the existing rate and the rest at the new rate.

Under the proposed policy, the gas price will be determined by the cost of LNG imports calculated on the average expenditure of the previous three months' total costs -- including operational, transmission and distribution charges -- as well as contributions to gas development, energy security and research funds. A 15 percent VAT would be imposed too.

Between July and September 2024, Petrobangla imported a total of 1,726 million cubic meters of LNG for Tk 10,979 crore. The per cubic meter cost of LNG during that period was Tk 63.58, and after including all additional charges, the final cost per unit reached Tk 75.72.

The new proposal comes despite the government's earlier announcement that they would not fix the prices arbitrarily bypassing the BERC like the ousted Awami League government used to.

The AL government curtailed the BERC's power as regulator and increased the gas price for industries by more than 150 percent by themselves and fixed it at Tk 30 per unit. The gas price for captive users was also increased several times.

The move to initiate the gas price hike comes as the ministry looks to narrow the fiscal gap of Tk 16,162 crore this fiscal year.

If the price is not increased, the government will have to come up with subsidies, the proposal said.

BERC chairman Jalal Ahmed told The Daily Star that they are yet to start work on the proposal.

"We will take a decision based on our standard operating procedure," he said.

As per the BERC procedures, they have to announce their decision within the next 90 days. They will also hold public hearings within this time frame.

The new gas pricing structure could dampen enthusiasm for establishing new industries as the increased costs may make the ventures less economically viable, according to businesspeople.

"If the proposal is accepted, industrialisation will come to a halt," said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, a major industrial gas user.

No new investment will come as the new units would not be able to compete with existing establishments with that much higher gas prices, he added.