Proposed gas price hike to increase apparel sector production costs by 18%
Gas distribution companies have proposed Bangladesh Energy Regulatory Commission (BERC) to increase the gas price to Tk 18.04 per cubic meter from current rate Tk 7.76 for the industry. If the proposal is accepted then, gas price will be increased by 132 percent.
The government wants to hike prices of gas to reduce the burden of subsidies as it has to buy per cubic meter of LNG at Tk32 and selling it at Tk 7.17.
According to Dhaka Chamber of Commerce and Industry (DCCI), Bangladesh apparel and textile sector to see an 18.06% rise in production costs, if the prices of gas is increased as proposed by the distributing companies.
On the other hand, production costs in the textile sector also will rise by 4.5% if the electricity prices is hiked by 30%.
DCCI made the rough estimation in its assessment on the impact of the energy price hike on the industry. “If the prices of gas for captive power and industry increased by 96.3% and 132.5% respectively, it will increase the production cost by 18.06% in the country’s textile sector,” said Muhammad Fouzul Kabir Khan, former Secretary to the Power Division.
Khan made the estimation at his keynote presentation at a seminar on “Energy Pricing: Impact on Industry” organized by DCCI in the capital on May 11.
“However, production cost will increase by 4.5%, if the price of electricity is increased by 30%.”
“The primary textile sector, a strong backward linkage industry of the apparel sector, is going through crucial time as the production costs have gone up caused by rising in workers wage and other expenses to improve safety standards,” Bangladesh Textile Mill Association President Mohammad Ali Kokhon told the Textile Today.
In the given situation, the rise in the gas and electricity price will add salt to wound. So, the government should not increase prices of gas and electricity prices right now, said Kokhon.
“The primary textile sector, a strong backward linkage industry of the apparel sector, is going through crucial time as the production costs have gone up caused by rising in workers wage and other expenses to improve safety standards.”
In adjusting prices of production costs, the government should give an opportunity to the industry to grow up, he added.
Meanwhile, apparel makers fearing to lose competitiveness in the global markets if the prices of gas and electricity as proposed by the distributors.
“For the last couple of years, the apparel sector spent a lot in improving the safety standard, while workers’ wages increased by 51% last year. The production cost went up by manifold but the buyers are not incensing prices,” Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy told the Textile Today.
As a result, we are losing competitiveness in the global markets to our competitors. So, our call is not to increase the prices of gas and electricity, said Salam, also a former President of Bangladesh Garment Manufacturers and Exporters Association.
Meanwhile, the experts suggested the government to increase prices gradually rather than a steep increase in energy prices.
Diversifying away from natural gas by investing more on renewable energy, coal and nuclear solutions and introducing energy-efficient building code, could a be a great solution, they added.