February 29, 2024, 3:43 pm

Shamim Jahangir

2023-01-27 04:35:28 BdST

BGMEA calls for review of gas tariff hike decision

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan urged top policymakers to review the decision on natural gas tariff hike.

He said the proposed tariff will increase the cost of readymade garment production by 10-40 percent.

“I am not against the natural gas tariff hike but the excessive tariff made it difficult to fight against competitiveness and grab unexplored markets while the country focuses on fetching $100 billion RMG from export a year by 2030,” BGMEA chief said.

The country’s readymade garment (RMG) sector earned $45.70 billion from export in 2022.

Faruque Hassan said the ministry should raise the tariff in phases to make the sector competitive.

He proposed withdrawing supplementary duties and VAT on LNG imports to make the sector competitive.

“Our cost of production will increase to various ranges between 10 and 40 percent,” Faruque Hassan said.

He added the cost of production will also create inflation and that will raise the bank interest as a result. “So, Bangladesh may lose competitiveness in global market,” the BGMEA president feared.

He called upon the ministry to stop pilferage of natural gas in the name of system loss.

“Even, any of our members are involved in pilferage of natural gas, BGMEA has no support for them.” 

“I urged Prime Minister’s energy adviser Dr Tawfiq-E-Elahi Chowdhury as well as State Minister for Power and Energy Nasrul Hamid through a separate letter to review the tariff,” Hassain said.

He said the tariff of LNG in the international market came down to $22. “So, the government will review the tariff as the blending cost of natural gas with local gas comes down significantly,” BGMEA president pointed out. 

The letter sent to Nasrul Hamid read the readymade garment will play a major role in earning the greenback by having 83 percent contribution.

Besides, around 4 crore people depend on the RMG sector directly or indirectly, the letter read.

The irregular supply of power and energy severely affected production of export oriented RMG, the BGMEA president said in his letter.

The unprecedented natural gas tariff decision on January 12, 2023 already has had negative impacts, raising the raw materials cost of the readymade garments, Hassan informed the policymakers.

The government increased the natural gas tariff by minimum 14.48 percent and maximum 179 percent for electricity generation for industries and commercial uses, effective from the next month.

“So, the government should raise the tariff in phases to make the RMG sector sustainable,” BGMEA president emphasised.

Earlier, Dhaka Chamber of Commerce and Industry (DCCI) President Sameer Sattar said, “The government had to increase the gas prices due to its own unavoidable reasons.”

“This move will impact industries, regardless of their size, as they may lose their competitive edge due to their cost of production going up,” he said, adding that small and cottage industries may try to pass on the additional costs to their end consumers as they face cost of production hike.

"When we were recovering from the Covid pandemic effects, the Russia – Ukraine ongoing war created further uncertainty in the global economy."

"Therefore,  any type of additional cost will create a burden for the private sector," the DCCI chief added.

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