Bangladesh has endorsed a new Gas Sales Agreement (GSA) with multinational company Karnaphuli Fertilizer Company Ltd (KAFCO), a top policymaker confirmed.
“As per the new agreement, KAFCO will pay Tk 30 per cubic meter of gas consumption,” Power and Energy Adviser of the interim government Dr. Muhammad Fouzul Kabir Khan told Just Energy News.
An official from the Energy and Mineral Resources Division (EMRD) said that KAFCO is scheduled to hold a board meeting on July 28, 2025, to formally adopt the new GSA. A brief agreement is expected to be signed immediately following the board’s approval.
The official also noted that KAFCO has agreed to settle outstanding gas bills amounting to Tk 1,035.62 crore once the new agreement is signed.
Market-Linked Tariff Mechanism Introduced
The revised GSA introduces a floor pricing system tied to international urea fertilizer prices. For instance, if the global urea price stands at US$250 per metric tonne, the gas tariff will be set at Tk 30 per cubic meter. Should global prices decline, the gas tariff could drop to as low as Tk 0.10 per cubic meter.
Currently, under the existing five-year agreement, KAFCO pays between Tk 18–19 per cubic meter. The new deal, which retroactively covers two years already completed, will be valid for a five-year term.
EMRD Secretary Mohammad Saiful Islam confirmed that the GSA with KAFCO is in its final stage, with the proposal already endorsed by the Power and Energy Adviser following negotiations between Petrobangla and KAFCO.
Tariff Ceiling Disputes and Historical Context
In 2003, the government signed a long-term agreement with KAFCO, capping gas tariffs at $2.11 per mmcfd, allowing the company to benefit from below-market rates for years. These legacy agreements are now expiring, prompting the need for a revised, market-aligned pricing structure.
Mounting Gas Bill Arrears
The country’s total outstanding gas bills have ballooned to Tk 17,487.60 crore as of May 2025. This includes: Tk 5,794.06 crore owed by the Bangladesh Power Development Board (BPDB), Tk 10,729.06 crore owed by Independent Power Producers (IPPs), and Tk 964.48 crore owed by fertilizer factories, excluding KAFCO.
“We’re planning to increase gas supply to fertilizer factories, and in return, they’ve begun making regular payments toward their arrears,” an EMRD official said.
The official added that a committee has been formed to oversee arrear recovery and ensure compliance with the new GSA terms.