No financial improvement despite gas price hike

Staff Correspondent: Import of liquefied natural gas (LNG) into the country started in April 2018. Until then one of the profitable government companies was Petrobangla. The company reported its first loss in the fiscal year 2018-19 after starting LNG imports. Since then, Petrobangla has not been able to make a profit in any fiscal year.
In the last five financial years from 2018-19 to 2022-23, the company has incurred operating losses of more than Tk 11 thousand crore. However, Bangladesh Energy Regulatory Commission (BERC) and Energy Department have increased the price of gas three times during this period.
Government is giving huge amount of subsidy every year for import of LNG. However, the country’s gas sector has continued to incur losses. To reduce these losses, gas prices have been increased three times in the last five financial years based on the proposals of the distribution companies. At this time, the price of gas distributed to public and private power plants and industrial plants has increased the most.
Gas prices were first hiked in July 2019 after the start of LNG imports. Gas prices of all categories were increased in June last year amid volatility in gas prices in the global market. After that, the energy department under special powers announced the latest hike in gas prices on January 18 this year, which will come into effect from February 1. After three rounds of increase, the rate of increase in the price of gas used in public and private electricity stands at 574.15 percent. Captive increased by 116.60 percent. 180 percent increase in large industries and medium industries. Apart from this, gas prices have increased by 76 percent in small and cottage industries, 260 percent in Surrey, 30 percent in residential hotels and restaurants and 7, 11 and 43 percent in unmetered single, double and pre-paid meters respectively.
Gas prices are going to increase again in the coming year 2024, the concerned said. According to them, as part of the loan agreement, the International Monetary Fund (IMF) has imposed conditions on the government to increase spending capacity and rationalize subsidies. Under this, a time-based pricing system is supposed to be introduced to coordinate the prices of energy products. If it becomes effective, the price of gas will go up.
The officials of Petrobangla claim that there is no alternative to increase the price of gas in order to improve the financial situation of Petrobangla and its affiliated companies. According to them, LNG has to be bought at high prices for a long time due to instability in international gas market prices. Also due to old pipeline gas distribution caused huge system losses, which increased the loss level of the company. It is almost impossible to improve this situation without raising gas prices.
After the three-phase increase, the price of gas per cubic meter in government, private and rental power plants has increased from Tk 4.45 to Tk 30. At this time, the price of gas has been increased from Tk 18.85 to Tk 30 captive electricity. The price of gas per cubic meter has increased from Tk 10.70 to Tk 30 in large and medium industries and Tk 17.4 paisa to Tk 30 in small and cottage industries. The price of gas per cubic meter has been increased from Tk 23 to Tk 30 in commercial hotels and restaurants and Tk 4 to Tk 16 in Surrey from Tk 45. Apart from this, the monthly bill for unmetered residential gas has been increased from Tk 925 to Tk 990 and two stoves without meter have been increased from Tk 975 to Tk 1,080. In the case of pre-paid meters, the price per unit has been increased by Tk 12.60 to Tk 18.
Energy experts do not see any justification for the financial loss of the companies under Petrobangla in the gas sector despite the massive price hike. According to them, the price of LNG in the world market was at a bearable level last year. Energy expert Prof Tamim told, “In the past years, Petrobangla’s huge losses in revenue and expenditure are due to import of high-cost LNG. Besides, there has been a big loss due to devaluation of money. However, this loss should not be there after the increase in gas prices. And to get out of Petrobangla’s losses, it has to increase the production of gas from local sources. But that is not happening.
According to the financial statements of Petrobangla submitted to the Ministry of Finance, Petrobangla has made huge profits by selling gas in the five fiscal years before the start of LNG import i.e. in the five fiscal years from 2013-14 to 2017-18. In those five financial years, the company made a net profit of Tk 4.5 thousand crores. And after the start of LNG import, the company has been making continuous losses since the fiscal year 2018-19. In the financial year 2018-19, Petrobangla’s net loss was Tk 230 crore. In the next financial year (2019-20 financial year) it stands at Tk 1,559 crores. After that, Petrobangla reported a net loss of Tk 2,400 crore in the financial year 2020-21 and Tk 3,156 crore in the financial year 2021-22.
Although the financial statements of Petrobangla for the financial year 2022-23 have not been released yet, a reliable source of the company said that the loss of the company has been estimated at Tk 4,275 crores. Accordingly, the loss of the organization in the last five financial years is more than Tk 11,200 crore.
The officials of the company believe that the system loss of the distribution companies under it has also played a role in the financial loss of Petrobangla. A senior official of Petrobangla told on condition of anonymity, “Bangladesh Energy Regulatory Commission’s unilateral determination of gas prices has caused huge losses to Petrobangla companies. System losses of gas distribution companies, especially Titus, have increased. A major reason for this is the supply of gas in old pipelines and illegal connections.
Petrobangla has spent more than Tk 1 lakh 15 thousand crore till the financial year 2022-23 while procuring LNG from the international market. In the context of the Russia-Ukraine war, the international market for energy products jumped at a huge rate. In this context, the price of LNG increases. Despite the supply shortage in the country, Petrobangla had to import LNG at a high price at that time. The energy department also stopped the import of LNG from the world market for a long time due to high prices.
In the current calendar year 2023, Petrobangla was in trouble with gas import and supply activities. The company was in trouble due to the cost of LNG import, dues of local foreign gas extraction companies and dues of Petrobangla companies. The company is now also planning to take a $500 million loan from Jeddah-based lender International Islamic Trade Finance Corporation (ITFC) to cover gas import costs.
Petrobangla Chairman Janendra Nath Sarkar could not be reached for comment despite attempts to contact him to discuss the overall issue.