Increased subsidy for LNG

The government is importing costly liquefied natural gas (LNG) to ensure uninterrupted gas supply to industries.As a result, subsidy allocation is being increased in the budget for the next fiscal (2019-20) as the government will have to supply liquefied natural gas at a price lower than the import cost,” said an official.

The subsidy in the power sector has been kept at Tk 9,200 crore in fiscal 2018-19, up from Tk 6,000 crore last fiscal. It may hit Tk 10,000 crore in fiscal 2019-20. The decision came in response to repeated demands from the businessmen and industrialists, finance division officials said. The government also calculated that if the LNG is supplied to industries or businesses at import prices, the cost of finished products will shoot up beyond the reach of the mass people.

As of May 30, the country’s LNG import stood at 569.3mmcf (million cubic feet), which will reach 1000mmcf shortly, according to Petrobangla.The government is selling gas at taka 7.17 per unit, whereas the import price is around taka 33. As a result, it needs subsidy. The government’s subsidy will increase as the LNG supply increases.

Officials said that the government had released Tk 2,500 crore as subsidy against the LNG imports in the outgoing fiscal year (2018-19).Various companies of Petrobangla have proposed to the Energy Regulatory Commission to increase the gas price from Tk 7 to Tk 40 for various sectors like power, fertilisers and CNG auto rickshaws.

But the government is yet to make a final call on the gas price hike, and to contain inflationary pressure, it is making up the difference between production cost and retail price of gas. Against the backdrop of an ever-increasing gas demand, the government decided to import LNG in 2010, to meet the country’s dire energy deficit.

The Petrobangla has started importing LNG from Qatar’s RasGas regularly since September 9 last year. Summit LNG Terminal Co Ltd, a subsidiary of Summit Power International and Summit-Mitsubishi consortium, began supply of LNG in Bangladesh on April 29 this year.The country’s demand for LNG to be supplied to sectors like industries, power and fertiliser plants would mark a steep rise in the coming years against the backdrop of depleting local gas reserves.

It has been projected that the country’s existing gas reserves would run dry by 2038 if no new exploration and discovery takes place.Energy Division sources said, gas demand in power generation and industrial units, including fertilizer production, is increasing gradually. On the other hand, the gas reserves in the country’s own fields are gradually depleting.

However, the government wants to meet the growing gas demand in the country through importing LNG and adding it to the national grid after regasification.After the start of LNG import, the government decided to reopen gas connections of the compressed industrial factories. As a result, the applications for gas connection to gas distribution companies are increasing. The government has taken steps to give about two thousand industrial gas connections, applied for earlier.