There is a possibility for managing the crisis partially by making capacity utilization of industries subject to an uninterrupted supply of quality electricity and gas

Engr. Razeeb Haider is a BUET graduate. He completed his B.Sc. in Mechanical Engineering from BUET in 2003 and his Masters’ Degree in Technology Management with Distinction (MTM) from the University of New South Wales Sydney, Australia. He became one of the most successful entrepreneurs at the age of 30. He is the Director of BTMA & Managing Director of Outpace Spinning Mills Limited and Director of Outright Fashion Limited, Outfit Fashion Limited, Outwear Fashion Limited, and Oasis Turner Limited. Mr. Razeeb has extensive involvement with social activities and is a member of the Institute of Engineers Bangladesh (IEB) and the UNSW Alumni Association, Sydney, Australia. Recently team Textile Focus had a conversation with Mr. Razeeb Haider regarding the recent energy supply crisis and how is it affecting Bangladesh’s textile industry. Key discussion points are mentioned below for our readers-

Engr. Razeeb Haider, Director, BTMA & Managing Director, Outpace Spinning Mills Limited

Textile Focus: The price of electricity and gas has increased. How it may affect our industry?

Razeeb Haider: We believe that the main tasks of BERC are creating healthy competition in the power and energy sector, and protecting the consumers’ interest. They were performing their assigned tasks so far through conducting public hearings on price proposals of utilities and reviewing observations and opinions. Amending the BERC act, the government has assumed the right to announce prices through executive order and has started exercising the authority. What is the use of keeping BERC in that case? We have kept taking licenses from BERC for operating captive power plants and paying fees, but we will not be getting any services in return. It is a clear case of conflict of interest. It will be better to close BERC in this circumstance. Again adjusting the price of gas and power every month is not at all acceptable to the industries. Industries, especially export-oriented industries operate under long-term contracts with buyers. Local industries can transfer the price increase burden to users, but export-oriented industries cannot. The price adjustment should be done on an annual basis. Besides, the government must provide a price forecast. Export-oriented industries operate on marginal profit. Hence there is no logic behind increasing through executive order or adjusting the price every month.

Textile Focus: Do you this our textile industry is ready to adjust the cost with the increase in electricity and gas? 

Razeeb Haider: RMG and Textile are not at all ready for these. Another essential matter must be ensured that the legacy of inefficiency, wastage, and theft under disguise is not included in the cost price. It is not clear to the users whether these costs are included in the price announced through executive orders. None will dispute the idea of completely withdrawing subsidies gradually. But cross-sector subsidies must also be withdrawn. Withdrawal of subsidies without elimination of inefficiency theft and pilferages is not acceptable at all.

It is being claimed that RMG and Textile industries may fail to remain competitive in the export market absorbing the price hike of gas to Taka 30/cubic meter. RMG may sustain remaining on foreign buyers, but backward linkage industries will struggle to survive. How far is this true? There is no comprehensive study of impacts for all industries. But we have already informed the government that Textile industries cannot absorb such price shocks. The price of twines will increase by 15-17 US cents per kg when the new price comes into effect. The cost of clothes will also increase. Backward linkages are the major advantages of Bangladesh. They supply 25-28 billion US$ worth of materials every year to RMGs. This acted as a positive catalyst for the increase of RMG export. The lead time, while we used foreign twines and clothes, was 90-120 days. Supply from local sources could bring it down to 60 days.

Another example will clarify it further. Before COVID the locally produced twines used to be sold at US$ 4.5-5/KG. In 2 years this has dropped to US$3/kg. If the buyers do not pay the right price, RMG and textile may cease to exist if asked to absorb the announced gas price shock. The Russian market is closed for the war, and the EU market is turbulent because of the energy crisis. Buyers are negotiating to reduce prices. It is almost certain that the RMG and textile sector is unlikely to sustain competition at the current energy prices without government subsidies.

Textile Focus: What can be the alternative to an industry-friendly fuel supply?

Razeeb Haider: Answering the question is very difficult for me. The government says that the entire gas reserve will deplete by 2031 if no significant new gas reserve is discovered. Consequently, low-value industries like RMG and textiles may not survive as energy generation may become exclusively import dependent. Fuel price may not be a cause of concern if Bangladesh can transit to high-value industries like Japan and Korea. Hence following the recommendations of experts we must expedite the exploration and development of our own fuel to enhance the contribution.

Textile Focus: FBCCI has proposed to the government a 58% average increase in gas prices upon reviewing the latest hike. Can the present crisis ease if the government agrees to it?

Razeeb Haider: The crisis will not be over if the government accepts FBCCI’s proposed gas price increase. Industries surrounding Dhaka did not get a gas supply for 12 hours. At other times the gas pressure remained very low. BREB introduced 3 hours of power load-shedding as well. Can the government provide uninterrupted electricity and gas supply after increasing the price? BPDB and Petro Bangla are not ensuring it. There is a possibility for managing the crisis partially making capacity utilization of industries subject to an uninterrupted supply of quality electricity and gas. In that situation, there is a possibility of getting the right price for the commodity from the buyers through negotiation. But I do not think that will be possible in the near future.

Textile Focus: What is your suggestion to face the energy crisis?

Razeeb Haider: The present situation has emanated from not taking the correct initiative on time. Demand for fuel was not appropriately projected. Coordinated initiatives for oil and gas exploration could not be taken over the past 15 years. Not connecting Bhola gas field to the national grid after the discovery was also a failure. Bangladesh must also change the strategy of its own coal resource exploitation on a priority basis. I do not think that Bangladesh can get out of its present crisis without exploiting its own coal and expediting its own petroleum resource exploration. At the same time, renewable energy and cross-border energy trading must also get priority attention.

Textile Focus: How can renewable energy support?

Razeeb Haider: Renewables cannot meet our absolute requirement ever. But planned development of resources may assist in stabilizing prices in 20 years. Bangladesh must give priority attention to grid-connected solar and wind energy. Industrial rooftops should be provided required support. Priority must also be given to importing hydroelectricity from Nepal and Bhutan. That will give some leeway from added pressure on expensive fuel imports.

Textile Focus: How to survive and what is your observation?

Razeeb Haider: The price hike of fuel will gradually ease if the war ends soon even if fuel and electricity supply cannot be uninterrupted for infrastructure constraints. The cost of power generation will be reduced. Bangladesh has large, medium, and small industries. Large industries have some windows of recovery. They may find alternate financing advantages. They may wither the storm and survive. Medium-capacity industries will be severely stressed. I do not think SMEs can survive absorbing the high stress of price hikes and the challenges of unreliable fuel supply.