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Bangladesh Gas Crisis Puts Deliveries in Jeopardy

First, power cuts in Sri Lanka. Now, Bangladesh is facing its own energy crisis.

The state-owned Bangladesh Oil, Gas and Mineral Corporation, better known as Petrobangla, ordered factories on Monday to suspend their natural gas use for four hours every day for the next two weeks as it grapples with shortages during Ramadan, the Muslim holy month of prayer and fasting that culminates in Eid-ul-Fitr.

Until April 26, all manufacturing plants, including those in the textile and ready-made garment sectors, will have to shut off their gas taps from 5 p.m to 9 p.m, raising fears of production disruptions that could roil the regimented schedules of export-oriented facilities and stoke worker dissent.

Syed Nazrul Islam, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country’s largest trade group of factory owners, called the move a “​​suicidal step for the national economy” because factories are currently rushing to fulfill order obligations before Eid-ul-Fitr, a three-day holiday dedicated to feasting and celebration in the world’s second-largest clothing exporter after China.

“The decision to stop using gas for four hours a day would severely disrupt manufacturing in various industries, including the garment industry,” Islam said in a statement. “This will disrupt exports. Consequently, paying salaries and allowances to workers before and after Eid-ul-Fitr would be difficult which might lead to chaos in the sector, including labor unrest.”

Like many industrial-based economies, the South Asian nation requires a lot of energy, most of which stems from natural gas. As temperatures in April continue to soar above 90 degrees Fahrenheit, demand for everything from air conditioning to groundwater pumping for irrigation has strained the electrical grid to its limits.

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Emergency maintenance works that caused the capacity of the Chevron-operated Bibiyana gas field, the country’s largest, to fall sharply earlier this month hasn’t helped, nor has soaring gas prices on the international market due to the war between Russia and Ukraine. Western sanctions against Russia have also delayed gas drilling in Bhola in southern Bangladesh by Russian state-owned gas company Gazprom. Affected residents raged on social media that they weren’t able to prepare meals for iftar, the breaking of the daily fast.

On the manufacturing front, suppliers worry that the gas cuts could interfere with spinning, dyeing and washing operations that have to run continuously.

“Textile machines operate non-stop round the year as disruption in their operation for once means the loss of thousands of dollars,” Saleudh Zaman Khan, director of the Bangladesh Textile Mills Association (BTMA), the national body for textile manufacturers and mills, told New Age, pointing out that some machines can take up to four hours to restart after a disruption. ‘The four-hour halt actually means the loss of eight hours.” Production at some facilities could fall by nearly half as a result.

The pressure to meet deadlines could also drive up freight costs. “If our production faces disruptions because of the gas supply cut-off, we will not be able to ship goods to buyers on time,” A. Matin Chowdhury, managing director of Malek Spinning Mills and a former president of BTMA, told the Business Standard. “Then, we will have to resort to air freights at several-fold high fares to meet shipment deadlines; otherwise, orders will be canceled and buyers’ confidence in us will be shattered.”

Mostafiz Uddin, managing director of Denim Expert, a denim manufacturer in the capital of Dhaka, took a more sanguine view, however. Because of Ramadan, many factories are closing before the cut-off time, he told Sourcing Journal.

“Of course, it’s a pressure to factories to organize the work timing as they have a load of orders to be executed ahead of Eid; and especially washing units which usually run 24 hours in double shifts are facing trouble due to the power cut,” Uddin said. “But it’s a temporary arrangement largely for maintenance purposes, which I believe would be possibly withdrawn by the government soon by next week. If not next week, by the Eid at [latest].”

Similarly optimistic was Miran Ali, managing director at apparel manufacturer Bitopi Group and vice president at BGMEA. “Hopefully this is a temporary measure due to a shortage of production of gas and much higher demands for power generation during the time of iftar and evening prayers,” he told Sourcing Journal. “We hope this will be lifted soon.”

Unlike Sri Lanka, Bangladesh faces a low risk of “debt distress,” the World Bank said Wednesday, since foreign debt accounts for only 17 percent of the nation’s gross domestic product (GDP). Following a strong economic rebound from the pandemic, its estimated poverty fell from 12.5 percent to 11.9 percent between 2020 and 2021, in line with the international poverty rate. The agency expects Bangladesh to maintain “robust growth” in the medium term and a projected 6.4 percent bump in GDP this fiscal year due to slower manufacturing sector growth as “pent-up consumption demand subsides.”

“Going forward, close monitoring of inflation and the potential impacts of the war in Ukraine will be important for the country’s sustainable and inclusive growth,” Mercy Tembon, country director for Bangladesh and Bhutan, said in a statement. “The World Bank stands ready to help Bangladesh address structural reforms to support recovery and strengthen resilience to future shocks.”

The World Bank said that the weight of the Russian-Ukraine war on fuel prices can provide South Asia with a “much-needed impetus” to reduce its dependence on fuel imports and transition to a “green, resilient and inclusive growth trajectory.” It also recommended that countries in the region transition to a greener economy by phasing in taxation that puts tariffs on products that wreak environmental damage.

“The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,” said Hans Timmer, World Bank chief economist for the South Asia region. “These revenues could be utilized for adaptation against climate-related disasters and to strengthen social safety net systems.”