Gas crisis lands industries in fresh setback

Country sees lowest factory output growth in 7 years
The troubled industrial sector may run into further setback this year as the energy situation shows no sign of immediate improvement, keeping investment decisions on hold, industry and banking sector people say.
Idle money has been on the rise in bank vaults due to low demand for credit from the private sector, which finds gas crisis as the number one impediment to investment.
Bangladesh achieved only 5.9 per cent industrial growth, the lowest in seven years, in the immediate-past fiscal year to June 2009.
Factory output growth was 7.2 per cent in 2007-08 fiscal, down from nearly 10 per cent and 11 per cent in fiscal 2006-07 and 2005-06 respectively. The growth was 5.5 per cent in fiscal 2001-02.
‘Potential investors are not going for new investment because of the energy and gas crisis,’ said Shahjalal Islamic Bank managing director Muhamand Ali on Saturday.
‘Now we have to be fully certain that an industrialist has a gas connection even before he opens a letter of credit for an industry,’ he said.
Fazlul Haque, a leading knitwear exporter who plans to set up expansion units, was not sure whether or when he would be able to implement his plan. For him, the acute gas crisis is the worst hurdle.
‘Inadequate gas supply lowers productivity and makes output costlier and less competitive in global market,’ he added.
He felt the county’s industrial output could triple if there was an adequate supply of gas and power.
However, advances to the manufacturing sector increased by 48 per cent in the current calendar year to March from 2005. Investments of banks in the country’s manufacturing sector stood at Tk 78,672.40 crore as of March 2009.
Advances of the private commercial banks increased by 65 per cent in March from 2005 figures, while state-owned commercial banks lent 11.36 per cent higher to industries.
Economic growth was 6 per cent or a little more for the past five years before slowing down to 5.8 per cent in the last fiscal year as impacts of global financial turmoil that caused some declines in export demand.
Although the recent recovery trend in global economy is boosting confidence of investors, the gas crisis continues to dampen their mood.
While existing industrial units are facing an inadequate supply of gas, new ones are not getting gas connections.
Stymied investment led to an increase in idle money in banks as private sector’s credit demand fell. Banks’ liquidity surplus increased Tk 10,000 crore in a month from July.
Bangladesh Bank data said credit to the private sector declined to 14.6 per cent in the last fiscal year from 24.9 per cent a year ago.
‘Gas has become the most vital issue for industrial development. Everything will collapse if no new gas sources are explored and adequate supplies ensured,’ said Syed Abu Naser Bukhatear, managing director of Dhaka Bank.
The country has been facing the gas crisis since 2007 and the problem continues to worsen, holding back scores of new industrial plants and expansion plans of existing factories.
Gas company officials said they were swamped with applications seeking increased gas supply and new connections as the global economy has returned to the road to recovery.
‘We are discouraging new connections,’ said MA Aziz, managing director of Titas Gas Transmission and Distribution Company, a subsidiary of state-owned Petrobangla.
Official forecast suggest the country’s gas reserves will run out by 2015 at the present rate of consummation.

Courtesy of NewAgebd