Bangladesh hikes natural gas price in likely blow to garment industry

Joli Khatun (R) works in a garment factory in Gazipur May 11, 2010. Joli works for 4-hour extra everyday as overtime and earns about 4,000 taka ($57) as her salary per month. REUTERS/Andrew Biraj

DHAKA (Reuters) - Bangladesh will raise natural gas prices for the second time in under two years, which should lead to higher costs for the country’s $28 billion garment export industry, its economic mainstay.

Gas prices will rise by an average 22.7 percent in two phases starting next month, the Bangladesh Energy Regulatory Commission (BERC) announced late on Thursday.

Rahman Murshed, a senior official with the BERC told Reuters on Friday that the hike was necessary to minimize the gap between the purchased price of gas and subsidized retail rates in the country. Gas is currently sold at nearly half the imported price.

Murshed said the “rationalized prices” will be effective in two phases in March and June.

Mohammad Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association, said the price hike was a blow to the world’s second-largest apparel exporter that largely depends on low wages and trade deals with Western countries to stay competitive.

“At present demand is low and the price of readymade garments is decreasing by the day,” Rahman said. “Now our cost of production will increase, lowering our competitiveness further.”

He said it was early to say how much costs will rise due to higher electricity prices linked to the gas price revision.

Power plants consume 40 percent of the total gas bought by Bangladesh, and the price for them will rise by 34 percent, said the BERC’s Murshed.

Households use 13 percent of the gas consumed in Bangladesh, the transport sector about 6 percent, fertilisers 6.5 percent and the industrial sector about 17 percent, said Murshed.

Reporting By Serajul Quadir; Editing by Christian Schmollinger