The export earnings fell for two consecutive months September and October this year. The crisis will further intensify if quality power and gas cannot be supplied to industries. Workers will lose jobs and investors cannot give money back to the bank if industries continue to lose productivity. This will cast adverse impacts on the economy. Hence without wasting any more time, an uninterrupted supply of gas to industries must be ensured by importing LNG from the spot market. Industries can earn 10-12% times more foreign exchange through exports than what will be spent on importing LNG. We are ready to pay a higher price for gas if required. The government must launch the necessary initiatives right now.
Md. Jashim Uddin, President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), observed in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.
The government claims that the sky-high prices have forced the government to suspend LNG purchases from the spot market. What are your observations?
High prices and stress on foreign exchange reserves cannot be denied. But there is no option but to ensure quality gas supply and ensuring uninterrupted power supply to industries as these are essential ingredients to operations. The cost of production has increased significantly for a major increase in industrial raw materials from the impacts of COVID and the war in Ukraine. But the poor supply of gas and frequently interrupted power supply have created further headaches. Required uninterrupted gas supply to industries must be ensured on a priority basis if required through rationing supply to other sectors. On the other hand, an uninterrupted supply of quality power to industries needs ensuring if required through the construction of dedicated power lines.
The government claims that it is not possible now spending huge foreign exchange for importing LNG from the volatile global market. What are your views?
Please note that industries assist the government in earning foreign exchange in two different ways. There are three different categories of industries. Some are purely export-oriented, some do export and at the same time supply in the local market, and some supply only to the local market. Those that supply to the local market saves foreign exchange by acting as import substitute. Export-oriented ones are directly earning foreign exchange. If industries run smoothly, 10-12% foreign exchange of what is required for importing LNG can be earned. Hence the government must give priority to the import of fuel for the sake of industries.
You have requested the government for an additional 200 MMCFD gas supply to industries. For this, you requested the government for importing LNG from the global market. For this government has to provide a sizable subsidy. What are your views?
After discussion with relevant experts, we are convinced that there will not be much stress on the government exchequer for imparting LNG to industries. For the interim period, we have requested the withdrawal of tax and vat on imported LNG. We are even ready for paying a marginally increased price of gas on condition that an uninterrupted quality gas supply is ensured. Industries cannot be protected if government pays no heed to our request.
Export earnings recorded a decline in September and October. You are apprehending that these may further decline if the present situation of energy and power supply persists. BGMEA and BTMA observed that buyers may also turn their back in such a situation. What are the reasons behind such apprehensions?
Please note that there is turmoil all over the world. The cost of energy and food has also gone sky-high in America and Europe. These have cast impacts on RMG trade as well. Buyers are already aware of the energy crisis impacting our productivity. If we can not improve the energy supply situation, once buyers turn around from our industry it will be extremely challenging to bring them back. The situation of job loss and unemployment will grow acute. Banks will also suffer in getting their money back which they provided as loans to industries. In case of supply reduction of industrial products to local market acting as import substitute, stress will be created on foreign exchange reserve. Such a situation is not desirable at all.
You discussed the options for combatting the crisis with the government high-ups, including the State Minister for Energy, at BIDA. How much optimistic you are about the outcome of such discussions?
On behalf of the business community, we put forward the depth and diversity of the crisis to government representatives. Our suggestions and thoughts about ways in mitigating the crisis have been dully put forward. They have also informed us of their contingency plans. We also believe that it is not possible overcoming the crisis on a stand-alone basis. There has to be a comprehensive and coordinated action plan for increasing LNG import, optimistic about a positive outcome, arranging a foreign exchange for it, withdrawing tax and vat, and marginal adjustment of gas price. The government has also realized the situation. We are optimistic about a positive outcome.
FBCCI recently organized a seminar on what requires doing for mitigating the energy crisis. Recommendations were made for exploiting its coal resources, expediting gas exploration, and eliminating system loss. Are you going to formally submit these recommendations to the government?
Government policymakers were there in our seminar. The suggestions and recommendations were made in their presence. We are working on formulations of reports for officially submitting these to the government. We firmly believe that there are no options but using coal as the preferred base load fuel for sustainable generation of electricity. Our neighbors India and China are keen on using coal till 2060 and 2070 for power generation. Power generation using imported coal has started already. Few more plants are nearing completion. But power from coal may not be cheaper as thought earlier as the price of coal like other fuels has also significantly increased in the global market. On these considerations, we believe our coal can be a better option for use in power generation. This will reduce stress on gas and the gas saved in that process can be used in industries.
Second: It is being thought that as a contingency measure system loss can be reduced from 10% to 4% in about 6 months. Government must take comprehensive measures for this. Government must also initiate an action plan for eliminating the system loss.
Third: Gas production from the proven recoverable gas reserve has increased by 1000 MMCFD over the past 14 years. But the addition to proven reserve through discovery is a bare minimum. BAPEX alone carried out exploration onshore. We believe government must launch as 10 years of a special program for onshore exploration inclusive of potential gas structures in the Chittagong Hill Tracts region. For this government must ensure budgetary allocation for at least 10 exploration wells annually. IOC and BAPEX must be included in the venture. This program should continue for the next 10 years.
Fourth: Resolutions of the maritime boundary disputes with Myanmar and India were a significant achievement. But no success Bangladesh could achieve in exploiting maritime petroleum resources so far. Required initiatives must be taken on a top priority basis for attracting major IOCs in making investments in our offshore through making required changes in our PSC documents in line with documents of neighboring countries.
Fifth: Power Distribution utilities and Polly Bidyut Samities cannot cater to the demand of industries in the respective franchise for issues of distribution networks although Bangladesh possesses a huge generation capacity. Especially the PBSs around Dhaka city have the highest numbers of industries. A dedicated power supply line must be constructed in areas where the industry load is 80% or above in the feeder. In that case, industries can gradually come out of reliance on captive generation.
How optimistic are you about Bangladesh coming out of the present energy crisis soon?
The Prime Minister of Bangladesh is very committed and is giving all support to industries for industrial development towards the graduation of Bangladesh to a developed economy. She is aware that industries will create employment and earn foreign exchange required for achieving Vision 2041. We are optimistic that necessary policy directives will come from her soon for alleviating industries from the gas crisis.
