Bangladesh’s steel manufacturers have urged the government not to increase electricity prices further, warning that the country’s steel industry is already under severe pressure from rising energy costs, dollar volatility and weak domestic demand.
Leaders of the Bangladesh Steel Manufacturers Association (BSMA) said the sector is currently “in the ICU” after multiple hikes in gas and electricity tariffs over the past few years.
At a press conference at the Economic Reporters’ Forum (ERF) office on Tuesday, they warned that any new increase in electricity prices could force many factories to reduce production, while some may partially or fully shut down operations.
Reading out a written statement, BSMA President Mohammad Jahangir Alam said Bangladesh’s industrial sector is passing through a challenging period due to the long-term economic impact of the Covid-19 pandemic, the Russia-Ukraine war, instability in global energy and raw material prices, the dollar crisis and exchange rate volatility, as well as ongoing geopolitical tensions in the Middle East.
He said the slowdown in both public and private sector construction activities has significantly reduced demand for steel products in the domestic market.
“High bank interest rates, limited access to credit, gas shortages, higher import costs and a working capital crisis have created additional pressure on industries,” he added.
According to the BSMA, electricity tariffs for industries have increased by nearly 30 per cent in recent years, while gas prices in some cases have risen by as much as 300 per cent.
“If electricity prices are increased again, production costs will rise sharply, making Bangladesh’s industrial sector less competitive internationally,” Jahangir Alam said.
He also argued that most large steel factories receive electricity directly from the national grid and therefore do not contribute to system loss, transmission loss or distribution loss.
Despite this, he said, steel manufacturers are being burdened with “unreasonable” charges, including demand charges, additional VAT and penalties linked to power factor issues.
“These have effectively become indirect methods of increasing electricity costs,” he said.
The BSMA called on the government to avoid raising electricity tariffs for the steel industry, reduce excessive demand charges and VAT, and review the policy of imposing additional charges based on power factors.
The association also stressed the need for uninterrupted and quality power supply for industries, alongside a long-term investment-friendly energy policy to support industrialisation.
Speaking at the press conference, BSMA Secretary General Suman Chowdhury said a public hearing on the proposed electricity price hike is scheduled to take place the day after tomorrow.
“We want a separate electricity tariff structure for the steel sector,” he said, adding that any increase in steel prices would raise the cost of government infrastructure projects as well as housing construction for ordinary people.
The association said 35 steel factories are currently in operation in Bangladesh with a combined annual production capacity of 12 million tonnes.
Under normal market conditions, domestic demand for steel ranges between 7 million and 7.5 million tonnes annually. However, current demand has fallen to around 4 million to 4.5 million tonnes, meaning factories are operating at below 40 per cent of their production capacity.
Among others present at the press conference were BSMA founding president Sheikh Masadul Alam, Vice-President Md Rezaul Karim and other industry leaders.