Gas prices surge adds to Bangladesh RMG and leather exporters woes

  •  Bangladesh
  •  Aug 10, 2019
  •  By WFB Bureau
Gas prices surge adds to Bangladesh RMG and leather exporters woes

A circular put out by Bangladesh Energy Regulatory Commission (BERC) on gas price hike has taken a toll on exporters within apparel and leather sector. 

Effective from today, the gas price for industrial use has jumped 37.88 per cent to Tk10.70 per cu. mtr. from Tk7.76, while captive power price mounted to Tk13.85, witnessing a 43.97 per cent hike from previous Tk9.62.

The gas price hike garnered concerns from exporters, manufacturers and trade association head alike. “On the basis of the information I have, gas bill will take up around 1.5% of the manufacturing cost. Therefore, 38 per cent increase in gas price means almost 1 per cent increase in production cost. This may not sound much in terms of percentage, but for an industry struggling for every penny this will be another blow,” expressed BGMEA President Rubana Huq.

Already facing the pressure of bringing down production cost, shorter lead times, compliance cost and maintaining competitiveness in global markets, the surge in gas prices have exacerbated the exporters’ situation. Besides crippling their financial plan, it also discourages entrepreneurs, mainly in SMEs to invest more in apparel and leather sector.

“Now, given the fact that the supply situation of gas did not improve and factories are suffering from pressure fluctuations, we are in tipping point with regard to pricing,” added Rubana.

A number of business call on government to increase the prices in phases so that it would put much less pressure on their finances.

“From the current fiscal year, the government is implementing VAT. In this context, a sharp rise in gas prices will be a huge burden for the textile and apparel sector. The rise in gas prices will leave the textile sector highly dependent on captive power, in tougher competition,” woes Mohammad Ali Khokon, President, Bangladesh Textile Mills Association.

Though not directly, the implications of increased prices of gas will also hurt finished leather goods, as leather tanneries, which provides raw material for finished goods, use gas.

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