Rationalisation of gas price a distant dream!

The country's gas distribution companies are expected to make hefty profits this year if their gas price-hike proposal at, what appears to be, an unprecedented level, comes into effect. Without enforcing any hike, the Karnaphuli Gas Distribution Company Limited (KGDCL), to cite an example, is set to make profit as high as 55 per cent in the current fiscal. Imagine what will be the situation if the proposed hike plan by the regulator, ranging from 62 per cent to 140 per cent is enforced at its various tiers!
A technical committee attending the recent public hearing on its proposal observed that as the company is supposed to run on cost-plus basis, it does not otherwise need any hike in its margin over gas distribution. However, reports in the media indicate that the committee's suggestions do not hold any ground on the sensitive price-hike issue as the decision comes from the highest level.
The company, to mention, proposed, of late, to raise the price of the hydrocarbon at a rate between 62 per cent and 140 per cent for its various consumers with a view to rationalising hike in margin and meeting its increased expenditures.
According to the proposal of the gas utilities, the monthly gas tariffs for domestic consumers should be set at Tk 1,200 from the current level of Tk 650 for double-burner users and Tk 1,100 from Tk 600 for the single-burner users. This is almost the double of what the users are now paying for this utility service. Per cubic metre of gas for domestic metered-consumers is expected to be raised to Tk 16.80 from Tk 7.0.
There has already been widespread public outcry against such a markedly striking price-hike plan. The proposed hike, if it is finally approved, will invariably multiply public sufferings. This kind of hike will affect daily expenditure of the common people including day labourers. The poor will get poorer. It is not known why the government is keeping everybody guessing about, and remaining silent on, this vital issue.
Energy experts put a question mark as to where this hefty amount of profit will go. Many say the surplus profits earned through sales of petroleum products should be used for upgrading the state-owned Bangladesh Petroleum Exploration Company (BAPEX).
The present trend suggests that the government has no immediate plan to reduce prices of the fuel oils in the local market although it said a number of months ago that it would lower such prices in phases, in three months' time, if the global fuel prices remained low.
After widespread criticism from all quarters, the government on April 25 did reduce the price of kerosene and diesel by only Tk 3.0, to Tk 65 per litre, and that of the price of petrol and octane by Tk 10 per litre. This did not have any discernable impact on the market and cost of living. Earlier in the same month, it lowered furnace oil price by Tk 18 per litre to Tk 42 to bring down electricity generation costs.
It looks like that the government was trying to maximise its earnings, capitalising on the lower price of fuel oil in the international market. The price of Brent Crude is still less than $50 per barrel. At this stage, a minister said the government has no plans to reduce the prices of fuel oils soon.
The issue of price adjustment of fuel oil is, he said, now dependent on the decision of Bangladesh Energy Regulatory Commission (BERC) over increasing the prices of natural gas. The price of fuel oils will only come down now if there is a drop in earnings through a hike in gas prices.
Reacting to such a situation, the Consumers Association of Bangladesh (CAB) said that the last fuel oil price cut only benefited the rich and the owners of transport vehicles and irrigation pumps, as the transport fares or the cost of irrigation for farmers did not come down simultaneously.
Critics say the World Bank (WB) and the International Monetary Fund (IMF) had failed to do justice to the poor people in the country. Earnings from duties and taxes from the sale of fuel oils were hidden. The sector was allowed to raise its earnings. The government, acting on their advice, raised the prices of diesel and kerosene by Tk 24 per litre and that for petrol and octane by Tk 22 per litre in four phases. Earlier, there were frequent rises in fuel prices that had raised the cost of living through inflation. Most sectors including transportation, kitchen market and service sectors were affected.
On the hydrocarbon issue, consumers alleged that the Titas was supplying them gas at much lower pressure — and that too, containing lower heating value, than its contractual obligations to its clients. The company is also billing its clients based on the usual rates depriving the consumers of their entitlement.
However, many accuse the Titas employees of harassing consumers as it spends much time to fix a problem and demand bribe for every service it provides. Huge illegal connections apart, businesses also alleged that operations of the Titas were not transparent.
Meantime, the BERC reportedly observed that the gas distribution companies had flouted most of the directives that were issued by it one year ago to improve services, operational efficiency and financial transparency.
The utilities were asked to set up pre-paid meters at households and commercial spaces and set up Electronic Volume Corrector meters at all other consumers' premises. They were also asked to dismantle all illegal gas distribution networks and to snap all illegal gas connections. So far all these directives have gone unheeded.
It's 90 days time only from the last public hearing day to pronounce the verdict. In view of the current trends, amid many turns and twists, about the prices of the fuel oils in the global market, it will be interesting to see what stance the government takes on the gas price issue.
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Source: The Financial Express


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