Industry bats for long-term policy approach to combat recurrent gas price hike

by Apparel Resources

17-May-2019  |  4 mins read

Bangladesh Garment Industry
Image Courtesy: youtube.com

It’s not very often one would see a particular sector losing its sleep over another! However, for the Bangladesh garment industry, the country’s energy sector is emerging more than a cause of worry, in the prevailing circumstances.

Amidst talks of proposed hike in gas prices (distributors’ proposal for doubling the average gas price – from Taka 7.35 to Taka 14.91 per cubic feet), garment manufacturers are at their wits end as to their survival and future.

With wafer thin margins, increased workers’ wages and overheads, and the economical burden brought in by sustainability-related demands, further hike in gas prices is the last thing garment makers could afford to accept.

“There is no scope to raise gas price… For whose interest will the gas price be increased? If the gas price is hiked at the moment, many factories would shut down,” the observations of BGMEA’s outgoing President Siddiqur Rahman demanding scrapping Government’s move to implement the hike draws a very grim picture for the industry, if the same is affected in principle.

It may be mentioned here that the Government wants to hike prices of gas to reduce the burden of subsidies as it has to buy per cubic metre of LNG at Taka 32 and selling it at Taka 7.17, keeping in mind which Bangladesh Energy Regulatory Commission (BERC) held a series of meetings with industry bodies and other stakeholders.

Even though the Government necessarily may not strictly stick to what it has proposed and rather try to hammer out a more agreeable middle path, to wriggle out of this situation. However, as per Nurul Islam, a former professor of the Bangladesh University of Engineering and Technology (Buet), there’s no choice but increase the gas price given the fact that the huge liability in the form of subsidy would hit the country’s exchequer for sure.

So what is the way out? As per industry insiders, what it calls for now is a long-term energy policy for the export-oriented manufacturing industries to enable entrepreneurs plan things accordingly and well in advance.

Economists are of the opinion that prices should be reasonable and the policy must be stable. Otherwise, it could have a lasting impact on investment and manufacturing industry, hindering not only the industry’s growth but the country’s overall economy as well. The garment industry after all is the backbone of Bangladesh’s economy contributing for more than 80 per cent of foreign earnings besides providing large-scale employment.

“…the policy should be predictable so that an investor can take decisions in making new investments. Frequent changes in policy are a barrier to invest, while it hinders the stability on investments both from home and abroad,” underlined a former BGMEA President interacting with the media.

Some are calling for increased transparency in the whole process to rein in the abrupt price hike as they feel even though Bangladesh is purchasing gas following the Public Procurement Rules; the same is not always followed when it comes to the energy sector.

Given the present scenario, the continuous hike in gas prices as has been witnessed in the last few years, would definitely eat up Bangladesh’s competitiveness in the global market (due to rise in production cost) thereby providing opportunities to the competitors to grab its apparel export share, fear many within the industry.

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