TATA's revised proposal and price of gas

Gas price
TATA seems not to have enhanced the purchase price of gas effective from day one. It has proposed to offer US dollar 1.50 per thousand cft of gas as before during the first 5 to 6 years. Later after 5 to 6 years TATA has offered to enhance the purchase price in the range of US dollars 2 to 4 per thousand cft. This price will be swinging between minimum 2 dollars and maximum 4 dollars according to price of products prevailing in the international market. This policy seems not to be so transparent and straight forward.

During the next 5 to 6 years' period, the demand of gas in Bangladesh and outside will go up manifold. Simultaneously cost of production and distribution will also go up. Consequently the price of gas for consumers at homestead, industries, factories, vehicles machineries etc will have to be increased. During this long period if TATA pays for gas at US dollar 1.5 per unit then the country may be economically losing due to under-pricing. We have been observing that the price of fuel oil in the international market is going up almost every day. If this trend prevails and it is very likely that it will, then price of fuel oil will have to be increased every year substantially inside the country.

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Gas is a cheaper substitute of fuel oil the demand of which will have sharp elasticity against the increase of price of petrol and diesel, as such its price will also go up invariably every year. In that context, selling gas to TATA at the constant price of US dollar 1.50 per unit for long 6 years will tantamount to selling gas at the price of water. Moreover, current selling price of gas for fertiliser factories is US $ 3.10, steel mills US $ 2.60, electricity plants US $ 2.79 per thousand cft. Compared to those prices price offered by TATA is undoubtedly lower. A contracted guarantee for supply of gas to TATA continuously for 10 to 14 years itself is a special privilege for TATA because it is not given to other industries. In this consideration further reduction of gas price for will be an extra financial gain for TATA but a financial loss for the country.

Hence it would be more prudent to sell gas to TATA at the same price as applicable for similar industries at home and abroad from time to time. Moreover the policy of determination of gas price pursuant to price of products in the international market is not commonly practiced, so it may not be followed by us too.

Guarantee for supply of gas
Gas is the only natural energy of Bangladesh. It should be called gaseous gold. The rate at which energy price in the world is increasing is alarming. Gas as an alternative energy might save the country one day in future from energy crisis. Currently we can observe that CNG is 70 per cent cheaper than petrol. That is why demand for CNG is going up every day, more and more vehicles are being converted into CNG daily. The number of machinery like generators, chillers, boilers electricity plants which are being run by gas are also going up every day because of cheaper gas compared to diesel. The people of North Bengal are yet to get gas for their home use. They cannot be left deprived for years. The peasants have themselves discovered to run their irrigation pump and tractor with cylinderised gas having been compelled by shortage and high price of diesel. Some trains had stopped running due to shortage of diesel. May be one day all trains will run by gas because of cheaper cost.

So we can foresee an era of natural gas as energy in the country when all vehicles, locomotives, machinery, plants and factories, cookers at home etc. will run by gas instead of petrol and diesel. That day the country will save foreign currencies worth Tk 15,000 to 30,000 crore yearly by way of not importing petrol and diesel. But this huge amount of supply of gas will gradually exhaust the reserves under the earth which is estimated at 20 to 30 TCF. TATA alone may need an estimated amount 2.16 TCF gas in 14 years. Not only for future generation but also as business policy it is necessary to preserve the gas reserves under the earth.

In Canada, USA and other countries of the world reportedly the reserves of petroleum and gas are kept untouched, instead the energy is imported from outside. The trick may be, when reserves in the Middle East or other oil producing countries will be exhausted, they will use their own oil and export it at exorbitant price. The gas reserves of Bangladesh are its invaluable asset due to which TATA has come for investment, others will also come in future. Hence it is our sacred duty to ensure that by selling gas to TATA and other prospective investors at concessional price the country is not deprived of the due benefit from gas.

Conclusion
During 2001 when UNOCAL offered to export gas to India some people became anxious to implement the proposal without calculating the cost/benefit implications. At that time I had presented a cost/benefit analysis in The Daily Star and recommended that the national committees should do their studies and decide about the matter. Luckily the committees didn't recommend the export. Now also I request that a national committee comprising expert professionals should be formed and given the responsibility of carrying out an analysis and pass their recommendations before a decision is made.

Ali Idris FCA is a freelance contributor