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Gas price hike a likely blow to garment industry

24 February 2017,Friday, 19:23

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, reports Reuters.

Gas prices will rise by an average 22.7 per cent 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 minimise the gap between the purchased price of gas and subsidised retail rates in the country. Gas is currently sold at nearly half the imported price.

Murshed said the "rationalised 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 per cent of the total gas bought by Bangladesh, and the price for them will rise by 34 per cent, said the BERC's Murshed.

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


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