Both the domestic and export-oriented industries are afraid of missing shipment deadlines triggered by the ongoing production disruption – a ripple effect of the frequent power cuts, gas supply shortage, and barriers to LNG imports caused by the USD crisis.
Sounding a note of caution that this situation – if allowed to continue – could lead to a collapse in Bangladesh’s industries, they warned that the country’s export revenue, domestic supply chain for essential commodities will be hit the hardest.
Speaking to The Business Post, industry insiders say they are currently witnessing up to eight hours of load-shedding daily, and the gas pressure in factories is not enough. Industries are now using high-cost diesel generators to continue production, which is hiking their production cost.
Some industries are even postponing production during load-shedding periods, and staring at massive losses.
Director (Corporate and Regulatory Affairs) of City Group Biswajit Saha said, “Production remains disrupted for a long time due to low gas supply, and the recent severe load-shedding made the situation more miserable.
“Our supply of goods to the market has already dwindled due to low production, and the situation will worsen if the crisis lingers. Our production costs are also skyrocketing as we are forced to use diesel-based generators.”
He added, “We are already under pressure due to the USD shortage crisis. Amid the situation, supply chain disruption to the domestic market will likely create instability.”
Due to the ongoing global economic crisis, Bangladesh is facing a severe shortage of forex reserves and high inflation. The country currently has $29.91 billion in forex reserves, and May inflation surged to 9.94 per cent.
Bangladesh has two key sources of foreign currency earnings – export and remittance, and those are not performing well since early this year. This creates more pressure on the forex reserves, as well as on the economy.
Under such circumstances, most of the industries were already struggling to survive. And now the severe gas and electricity supply shortages have compounded their already precarious situation.
On the issue, Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon said, “Our generator has started to lose productivity after running for 8-10 hours per day due to frequent load-shedding, and gas supply shortage.
“We are spending Tk 30 to generate per KW of electricity using a diesel-run generator. How will we survive at a time when our export situation is trending low?”
Plagued by power outages
According to the Bangladesh Power Development Board (BPDB), power generation was 11,647 MW (day) and 13,635MW (night) on June 4. That day, the country witnessed a 4,000 MW deficit.
Due to such deficits in electricity generation, the Power Division has no choice but to introduce frequent load shedding across the country.
On Monday, State Minister for Power Nasrul Hamid admitted that the power outages have become intolerable. He mentioned that most of the power plants are operating at half capacity as it is not possible right now to buy the required liquid fuel, gas and coal due to USD shortages.
This has exacerbated the ongoing crisis. However, Nasrul is optimistic that the power supply will return to normalcy within the next two weeks.
The same day, due to the coal shortage, Payra Power Plant shut down completely. This has intensified the ongoing power outages across the country.
Bangladesh-China Power Company Ltd (BCPCL), the owner of Payra power station, says it is not possible to buy coal because the Bangladesh Bank is not releasing USD.
The Business Post reached out to the regulator for comments on the issue, but could not get a response till the filing of this report.
Imran Karim, former president of Bangladesh Independent Power Producers Association (BIPPA), said, “Independent power producers (IPPs) owe at least $1.5 billion to the BPDB. The companies are not able to produce electricity according to demand by importing fuel.”
Gas supply far from demand
Petrobangla’s daily report issued on June 4 shows the 3,027 MMCF gas was supplied to the country on June 4 against the total demand of 4,000 MMCF. Insiders say currently the total gas demand in power plants is 2,149 MMCF, but only 1,217 MMCF is being supplied.
The report mentions that the total LNG supply in Bangladesh was 875 MMCF on Sunday.
Petrobangla Accounts Department sources say due to the USD crunch, the state-owned agency is unable to pay the bills of LNG, floating storage regasification unit (FSRU) charges and the bills of international oil companies (IOC) operating in the country.
For this reason, Petrobangla has to pay a fine. At present, the total dues of Petrobangla are $250 million.
Under the circumstances, Petrobangla wrote to Bangladesh Bank several times seeking a way to resolve this issue.
On May 2, the Energy Division sent a letter to the central bank governor, requesting the supply of sufficient USD to allow uninterrupted supply of natural gas and LNG, and avoid penalties.
Exporters could miss shipments
The country’s export sector has been facing order shortages since the middle of last year. In FY23, nearly all major export-oriented sectors had performed negatively in terms of revenue for at least one month.
Amid this situation, power outages and gas shortages are compounding their losses, and creating a negative impact among the buyers.
Managing Director of Nipa Group Md Khosru Chowdhury said, “Just a month ago, I needed 200 litre of diesel to run the generator during load-shedding. But now I am using 1,000 litre of diesel daily as we are facing up to 8 hours load-shedding.
“I had already cut the daily production by 1-2 hours. Due to the load-shedding, I will incur at least Tk 1 crore losses this month, and the export orders are already low. I do not know whether I will be able to meet my shipment deadline under the current circumstances.”
Fakir Fashion has 50 tonnes of dyeing capacity per day, but the company is now capable of only 20-25 tonnes as gas pressure remains as low as 1-2 PSI most of the time during the day. Besides, their production is being affected by five to six hours of load-shedding every day.
The company’s Managing Director Fakir Kamruzzaman Nahid said, “We used to pay Tk 1.2 crore in gas bills per month on average in the past, which has now jumped to Tk 3 crore after the recent price hike.
“Due to the load-shedding, we are now spending Tk 30 lakh on diesel to run generators.”
Tajin Leather Corporation’s Managing Director Ashikur Rahman said, “It is impossible for me to continue production by using the diesel-run generator as my factory is facing six to seven hours load-shedding every day.
“Diesel has become expensive, and this is why I am forced to halt production during the load-shedding period.”
He added, “We are already in trouble due to low export orders. Amid the situation, load-shedding is putting us on the edge of a cliff. As I am halting production multiple times a day due to power outages, the quality of my goods is taking a hit. I might also miss the shipment.”
Ashikur mentioned that the Eid-ul Azha is just around the corner, and millions of cattle raw hide will be procured during the period. If the gas and electricity crisis does not get resolved before the Eid, it will spell disaster for all tannery owners.
Fuel oil import crisis
Due to the ongoing USD crisis, the Bangladesh Petroleum Corporation (BPC) is unable to pay the fuel import bills.
Insiders say the international oil suppliers have threatened not to send oil cargo to Bangladesh. According to a letter of BPC sent to the Energy Division recently, the national demand of 5 lakh tonnes of refined and 1 lakh tonnes of crude oil are imported through 17-18 LCs every month.
Sonali, Janata and Rupali banks usually open 4-5 LCs per month, but Agrani Bank has expressed reluctance to open more than two LCs.
Due to the scarcity of USD supply from the Bangladesh Bank, these banks are not able to pay the import bills in time. It takes 25 to 30 days to pay off an LC. On May 11, international suppliers owed BPC nearly $300 million.