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Another gas price hike would dry out textile industry’s competitive advantage

Government has started an initiative to increase gas price for captive power plant users by 130 percent. This is going to be a great blow for the textile companies as most of the companies are running production basically on their own captive power plants. When the country was having severe power crisis, the industry owners borrowed high cost money from banks and invested on gas based captive power plants over the years. Due to gas supply shortages they had to reinvest in many of them for making them duel fuel run. Now with such sudden and big jump of gas for these captive power plants will make them simply unusable in many cases, industry insiders opined.

captive-power-plantBangladesh Energy Regulatory Commission (BERC) has started the process of gas price hike and has called for mass hearings from August 7, 2016. As per the news reports it is known that the gas distribution companies of the country had submitted their proposal to BERC to increase gas prices by an average of 87.66 percent.

For household users of single-burner oven and a double-burner oven the price have been asked to make those Tk. 1,100 and Tk. 1,200, while now these are of Tk. 600 and Tk. 650, respectively. The companies have been asked to hike the per unit price of compressed natural gas (CNG) from the existing Tk. 27 per unit (per cubic metre or pcm) to Tk. 49.50, marking an 83 per cent increase. For electricity producers, the gas distributors have proposed to increase the price per unit by 63 per cent from Tk. 2.82 to Tk. 4.60. The other proposed increases are for fertilizer units—from Tk. 2.58 to Tk. 4.41; industrial units—from Tk. 6.74 to Tk. 10.95; commercial units—from Tk. 11.36 to Tk. 19.50; and for household meter-based users—from Tk. 7 to Tk. 16.80.

However the biggest axe is going to be on the industrialist neck as for captive power producers, the proposed increase is by 130 per cent, from Tk. 8.36 to Tk. 19.26. Most of the textile companies are running on their own captive power. Only few months back in September 2015 gas price was increased. That increment has made power cost higher already and if now again it goes up more than double, many industries could be shut off, industry associations have mentioned. Bangladeshi high power consuming textile sections like spinning and weaving are facing fierce competition from India & China. With the planned gas price hike the cost of production in Bangladesh will reach in a level where its textile manufacturers will simply lost its business competitiveness, industry experts opined.

Current plan of gas price hike is told to adjust increasing salary cost of the gas distribution companies. Six government distribution companies are trying to keep intact their profitability but the plan if implemented will dry up competitiveness of private business. An article on impact of imbalanced public sector spending increment on the private sector have been published in Textile Today June 2016 issue. And the possible impact of this plan would be a great example. As the price hike is proposed in all consumers’ level it will have spiral effect on public purchasing capacity and then it will create another vibe for increasing salary of private sector employees, industry owners has mentioned.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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