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Textile millers are willing to pay more for gas so that the government can boost its imports, but the industry leaders seek assurance of uninterrupted and quality supply, as gas is used at several phases of production and also to generate electricity.
A stable supply of gas is essential for the millers to keep the factories running and to ensure supply of raw materials to the country’s readymade garment (RMG) sector, which in turn would allow this industry to retain its stellar export growth.
The Bangladesh Textile Mills Association (BTMA) placed a proposal in this regard to the media at a press conference on Saturday, recommending several rates and options for the government to consider.
BTMA President Mohammad Ali Khokon told reporters, “We are not getting any gas at least 12 hours a day, which has cut our production by 60 per cent and increased the production costs significantly, pushing the prices of per kg yarn from $1.25 to $2.50.
“We are currently paying Tk 16.33 for per cubic metres (M3) of gas, but we are not getting adequate supply. If the government starts importing 200 million cubic feet gas per day (MMcf/d) of liquefied natural gas (LNG) from the spot market at $25 per Metric Million British Thermal Unit (MMBTU), per M3 average costs will rise to Tk 22.83 and we are ready to pay it.”
Khokon continued, “But the condition is, the government must ensure uninterrupted gas supply to us. Even if the government imports LNG from the spot market at $30 per MMBTU, the average price of per M3 gas would hit Tk 28.
“But we would have to accept such a price, because gas is essential for the survival of our industry.”
He then said, “The government will have to spend an additional $360 million from forex reserves per month on average to import 200 MMBTU LNG from the spot market. However, we will be able to bring in $4.8 million in export earnings using gas worth $0.2 million.
“Due to the ongoing gas shortage, the sector already lost export orders worth nearly $1 billion, and around 1 million jobs in the textile and apparel sector are at risk.”
What’s the current situation?
Bangladesh currently has 20 operational gas fields with 2,300 MMcf/d of supply against a national demand of 3,500 MMcf/d, according to the Bangladesh Petroleum Exploration and Production Company (BAPEX).
To cover this gap, the government had planned to import LNG and signed a long term agreement with Qatar and Oman to import 500 MMcf/d. Besides, the government also imports LNG from the spot market on occasions to fulfill domestic demand.
After Russia invaded Ukraine in February this year, the price per M3 gas in the spot market rose from $6-$7 to $35. Besides, Bangladesh’s forex reserves started to dwindle steadily, going under $37 billion from $48 billion last year.
For this reason, the government stopped LNG imports from the spot market to save forex reserves, and failed to import 140 MMcf/d gas under the agreement due to a notification glitch. This string of events triggered a severe gas shortage in the country, hitting the industries hard.
On the issue, BTMA’s Khokon said, “A lack of proper energy policy created this ongoing crisis. The authorities have failed to produce energy through gas mining, and this is why the country is now facing a gas shortage.
“It is almost impossible to establish an industry with import-dependent energy policy.”
BTMA says if the member factories are able to run uninterrupted production, per Kg yarn manufacturing cost will reach $1.25 if gas prices remain the same. The yarn price will hit $1.35 if the gas price reaches Tk 22 per cubic metre.
The apex body claimed that the apparel and textile sector earned $44 billion in FY22 through exports. Textile millers contributed $21 billion, which is 45.5 per cent of the figure. But the gas shortage is threatening this value addition.
“Many smaller textile mills are on the edge of financial ruin, and some are struggling. We fear that many banks would go bankrupt if the crisis goes on for longer, because we are unable to repay our loans,” Khokon said.
