Prime Minister Sheikh Hasina's power, energy and mineral resources advisor Tawfiq-e-Elahi Chowdhury caused an uproar in the country this week by suggesting that power consumption may have to be forsaken even during the daytime, in order to balance the nation's priorities between safeguarding the country's agriculture and industry sectors, the purchase of Liquefied Natural Gas on the international energy markets and maintaining the country's foreign exchange reserves.
It was obviously uttered as a way of speaking, rather than meant literally, but it reflected the pinch the government is feeling already, as its dependence on the international energy markets escalates with the country's own gas reserves fast dwindling. It came as the return of loadshedding seemed to grow more and more entrenched, with rolling power cuts now a part of life for Bangladeshis throughout the country. Parts of the capital are now suffering without electricity for up to 8 hours a day, taking much of the shine off one of the Awami League-led government's most visible and important achievements, i.e ending the crippling power crisis in which Bangladesh was bogged down. Not a good look now, just over a year or so out from the next election.
Tawfiq made this remark at a discussion on 'Mitigation of the Impacts of the Energy Crisis on the Industry Sector', in the city's Westin hotel on Sunday. Bangladesh Chamber of industries (BCI) organised the discussion, in a week during which we saw the business community start to air serious concerns over how the country seems to have sleepwalked into the museum where it had sent loadshedding under AL's leadership (and in its words), and brought it back again.
Tawfiq said the government is giving utmost priority on the agriculture and industry sectors. Speaking at the discussion as chief guest, Tawfiq said the government is trying to increase gas supply in the industrial sector in various ways. 80 million cubic feet of gas can be converted into CNG for use in Bhola. The gas would be transported to Dhaka by a barge within two-three months. Businessmen can use this gas in their factories.
Businessmen from different sectors shared the problems they are facing due to the ongoing energy crisis. They said production has to be stopped for as long as 12 hours a day due to the gas crisis. As a result, work orders might get slashed and half the workforce may become unemployed.
Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) president Md Jashim Uddin said Bengal Group has many factories in Savar. Employers call him daily and complain, "Sir, you are the president of FBCCI but production remains suspended for seven-eight hours daily in our factories."
After hearing from the businessmen, the adviser shared his plan to increase the gas supply to the industrial sector by decreasing in other sectors.
"As the chance to import is slim, some person or other has to decrease the consumption to increase the gas supply in the country. Load shedding will increase if the gas supply is reduced in the power sector. But we have calculated that decreasing supply to the power sector is the best solution for supplying more gas in the industry sector," Tawfiq said.
Some businessmen stood up while the advisor was delivering these assurances and sought some specific solutions to this crisis.
Assuring them, Tawfiq said, "I request you not to lose courage. We will do everything possible from the government side. If necessary, we all present here would take a pledge that we wouldn't consume electricity during the day if necessary."
Also in the audience that day was the president of the Bangladesh Textile Mills Association (BTMA) Mohammed Ali Khokon, who had emphatically pointed out the troubles cropping up in his sector as a result of the serial loadshedding at a press conference, and even offered to pay more for gas as a way to encourage the government to resume purchase of LNG on the international spot market.
Textile mill owners have been opposing gas price hike for quite some time. But the situation has now deteriorated to such a level that they are saying, "Ensure gas supply. We would pay more if necessary."
The BTMA in a press conference on Saturday said 90 per cent of the industries are suffering for gas-crisis now. They are forced to suspend production for an average 12 hours a day due to gas shortage.
The daily demand for gas in the country is 3.8 billion cubic feet. The authorities could supply 3 billion cft gas just some months ago, which has now dropped to 2.6 billion. Petrobangla has suspended procurement of LNG from the spot market due to price hike.
BTMA president Mohammad Ali has made a proposal to the government that if 200 million cubic feet LNG is imported at 25 USD per 1 million British Thermal Unit, then per cubic feet in the country would increase by Tk 88.28. Per cubic feet would cost Tk 21.36 if the government supplies gas after importing LNG through a long term agreement and from the spot market and mixing the gas from local wells.
The average price of per cubic feet would be Tk 25 if the LNG import is doubled to 400 million cubic feet instead of 200 million cubic feet. The BTMA president said they are willing to offer to go upto Tk 22 per unit of electricity, from the Tk 16 per unit they are currently paying,
BTMA said producing per kilogram yarn would usually cost USD 1.25 but the factories remain stopped for half of the time, leading to double the cost of production. The price of cotton, the raw material of yarn, has fallen in the international market, but the textile mills have bought it at a higher price. As a result, the textile mill owners are in crisis.
The government assured that the situation would improve in September-October but no indication of any improvement is evident. Not only industries, agriculture and other businesses are also being hit hard by the energy crisis. There is an apprehension that the situation would spiral out of control if any timely intervention is not made.
LNG needs to be imported even at a higher cost in line with BTMA's proposal. The government's wrong policy of depending on import is to blame for the energy crisis.
The businesses' view
The output of textile mills has dropped to 40 percent due to shortage of gas supply for almost 12 hours a day, according to Bangladesh Textile Mills Association (BTMA).
"We are not getting gas supply to our factories for 12 hours from 5:00 pm to 5:00 am. The textiles mills can utilise only 40 percent of their capacity," BTMA President Mohammad Ali Khokon told a press conference at a city hotel on Saturday.
Factories can operate only for nine hours for lack of gas supply, he said.
A total of 1700 textile mills supply 7 billion metres of fabric to the local apparel industry, allowing them to save around $8 billion in FY 2021-22, the BTMA chief said.
He said over 1,000 textile mills are at risk of closure amid gas crisis.
"The retention of $21 billion export income is at risks due to the significant drop in production due to energy crisis, putting the livelihoods of one million people at risk," he said.
The BTMA member companies have already cancelled orders worth $1 billion due to the gas crisis since March this year.
"If the factories do not get gas supply, the situation will worsen in November and days to come. The factories are unable to make plans for 2023 due to uncertainty in the energy supply situation," the BTMA president added.
The factory owners have invested $16 billion in the textile sector, which is expected to reach $19 billion by 2025, according to the trade body leader.
"Around 70 percent of the investment comes from bank loans. The factory owners failed to pay instalment in time due to fall in production. Many investors are now at risk of being defaulters," the BTMA president said.
Around 84 percent of the country's export income comes from apparel and textile products while the primary textile sector meets the demand for 90 percent yarns for knit and 45 percent fabric for woven garments, according to the trade body.
The textile mills generate around 1700 megawatts of captive power while the producers contribute around Tk 5 billion to the national exchequer.
BTMA president called upon the government to ensure a minimum supply of 3000 million cubic feet per day (mmcfd) gas to the textile mills.
"Now, Petrobangla supplies 2300 mmcfd and 360 mmcfd come from liquefied natural gas under long-term contract. There is a gap of 340 mmcfd against the demand for 3000 mmcfd. I think the government can meet the demand by importing LNG from open market," he said.
The small fabric mills are facing a major setback due to disrupted power supply.
"The mills located in Sirajganj, Pabna, Araihazar, Rupganj, Palash, Kalibari and Madhabdi areas are operated by electric machineries. In the recent times, the small factories and dyeing mills have been affected by severe power crisis. The loss cannot be addressed with money only. Many important raw materials for colour and chemical are getting damaged due load shedding," the BTMA president added.
The government has already introduced area-based load-shedding after suspending 250mmcfd LNG import due to heated international market of the Russia-Ukraine war.
Gas shortfall is also affecting households and other sectors also.
A confluence of crises
The depreciation of currencies in most developing economies is driving up food and fuel prices in ways that could deepen food and energy crises that many of them are already facing, according to the World Bank.
The global lender came up with the statement in its latest report The 'Commodity Markets Outlook', said a press release issued from Washington on October 26. The report said that in US dollar terms the prices of most commodities declined from their recent peaks amid concern of an impending global recession.
From the Russian invasion of Ukraine in February 2022 through the end of previous month, the price of Brent crude oil in US dollar fell by nearly 6 percent. But because of currency depreciations, almost 60 percent of oil-importing emerging market and developing economies saw an increase in oil prices in their domestic-currency terms during this period.
Nearly 90 percent of these economies also saw a larger increase in wheat prices in local-currency terms compared to the rise in US dollars, the WB observed. Elevated prices of energy commodities that serve as inputs to agricultural production have been driving up food prices, it said.
During the first three quarters of 2022, food-price inflation in South Asia averaged more than 20 per cent while in other regions, including Eastern Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa, Sub-Saharan Africa, it averaged between 12 percent and 15 percent. East Asia and the Pacific had been the only region with low food-price inflation, partly because of broadly stable prices of rice, the region's key staple.
'A further spike in world food prices could prolong the challenges of food insecurity across developing countries,' said Pablo Saavedra, the World Bank's vice-president for Equitable Growth, Finance, and Institutions.
Energy prices that surged about 60 percent in 2022 are projected to decline 11 percent in 2023. Yet, energy prices next year will still be 75 percent above their average over the past five years.The price of Brent crude oil is expected to average $92 a barrel in 2023 -- well above the five-year average of $60 a barrel.
Both natural gas and coal prices are projected to ease in 2023 from record highs in 2022. Coal production is expected to significantly increase as several major exporters boost output, putting the climate-change goals at risk. Agricultural prices are projected to decline 5 percent next year.
John Baffes, senior economist in the World Bank's Prospects Group, said that the forecast of a decline in agricultural prices was subject to an array of risks.
'First, export disruptions by Ukraine or Russia could again interrupt global grain supplies. Second, additional increases in energy prices could exert upward pressure on grain and edible oil prices. Third, adverse weather patterns can reduce yields,' he added.
Words of reassurance
State Minister for Power, Energy and Mineral Resources Nasrul Hamid has said necessary measures will be taken to address the low pressure problem in gas supply to industries, reported our sister newsagency UNB.
"We'll take a move to resolve the local problem in gas supply so that situation doesn't deteriorate," he told reporters after a meeting with business body leaders at the Bangladesh Investment Development Authority (Bida) at Agargaon in the city on Wednesday.
He said the business leaders have complained that industries are not getting gas in adequate pressure in some particular areas. "We'll look into those to fix them"
A group of business leaders, led by president of Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) Jashim Uddin, participated in the meeting while Prime Minister's Private Industry and Investment Adviser Salman F Rahman were present on the occasion.
The meeting was held at a time when the export-oriented industries, especially textile, garment and ceramic manufacturers are desperately persuading the top policymakers to get adequate gas and power supply against the backdrop of the ongoing energy crisis.
Nasrul said he has discussed with the business leaders to address the local problems that the industries are now facing in gas supply. He said the meeting mainly focused on the issues of local gas supply.
He assured them they would get a similar level of supply to what they received previously. "We all will together try to keep the supply better in the coming months and also next year".
Responding to a question, Nasrul said if the global situation further deteriorates, things will be different and that's a different issue.
He admitted that the business leaders have requested him to increase the import of gas. "But that's the government's issue, not theirs," he added.
On the issue of the business leaders' request for increasing the gas import spending annually by $1.2 billion, Salman F Rahman said the issue does not depend on foreign exchange reserves.
"It's the issue of availability of gas at an affordable price... The global market of gas is not stable. After a fall, the price has again gone up," he said.
FBCCI President Jashim Uddin said the business leaders have placed different options for enhancing gas supply to industries.
"We'll further discuss the issue. We'll all be trying to resolve the problem unitedly," he said.
Leave a Comment
As expected, the IMF has formally approved what it called a 'stabilisa ...
The United States and the Philippines announced an expansion of Americ ...