Industry production drops below 30% as gas supply shrinks further

Industry owners say may not survive this prolonged crisis

Mithela Textile Industries, a weaving-dyeing-printing factory in Narayanganj’s Araihazar, has seen its production drop below 30% for the past month due to a severe gas crisis.

Its Managing Director Md Azahar Khan has nothing much to say: “I don’t know what to do. Please pray for me so that I can survive until the end.”

But while Mithela Textile is still operating at a very low capacity, another textile factory, Intimate Spinning Mills, also in Narayanganj, is almost closed due to the gas crisis.

“I have been in the spinning sector for nearly four decades and I have never seen such a severe gas crisis as this one,” Khorshed Alam, chairman of the factory, told TBS.

Gas-based industries have been facing gas shortages for a long time, but the situation has worsened significantly over the past three weeks as one of the two floating LNG terminals in the Bay of Bengal suffered damage from Cyclone Remal that hit the coastal areas on 27 May. The damaged unit is under repair and it may take until mid-July for it to return to service.

Not just the textile industry, hundreds of such industries that rely on gas – spinning, dyeing and printing factories, knit garments, cement and ceramics, iron and steel industries in Narayanganj, Savar, Ashulia, Gazipur, Narsingdi, and Mymensingh – have seen their production drop below 30%.

Entrepreneurs say officials from Petrobangla, the state-owned gas company responsible for natural gas supply, have informed them that it will take approximately another month and a half to resolve the issue.

Md Shahidullah, managing director of Metrocem Ispat and Metrocem Cement, told TBS that they are keeping their factories operational only during night shifts to cope with the gas supply shortage.

Mohammad Hatem, a knitwear entrepreneur, has shared a similar experience.

According to textile millers, approximately 700 textile factories under the Bangladesh Textile Mills Association (BTMA) are experiencing severe disruptions in production due to the gas crisis. While the approved gas pressure in the factories is supposed to be 10 to 15 PSI (pounds per square inch), it has been staying between 0 and 2 PSI for the past month.

While the occasional gas crisis is experienced by industries for short periods, this time it is becoming prolonged.

KM Selim, general manager (accounts and finance) of Modhumoti Tiles Limited in Savar’s Ulail, said they had to announce the complete shutdown of their factory on 1 June due to the gas shortage.

“To keep the factory running, we need a minimum gas pressure of 8 to 9 PSI. But the pressure has dropped to 0.5 PSI since Cyclone Remal,” he told TBS.

Modhumoti Tiles, which employs around 400 workers, is now incurring a loss of at least Tk6 lakh daily due to the closure. “Production is unlikely to resume until the gas supply normalises,” Selim added.

Md Jasim Uddin, owner of Aman Garment in Gazipur, said they are experiencing power outages for at least five out of eight production hours as the gas shortage is hampering power generation.

“It will be very difficult to adjust the prices as the increased utility and wage expenses have pushed us in a tight corner,” he told TBS.

Meanwhile, BSRM, the country’s leading steel manufacturing company, fears its production of rod and billet would be incurring losses due to the ongoing gas shortages.

The daily rod production capacity of BSRM is 5,500 tonnes across its two factories. The production capacity of its four billet factories exceeds 6,000 tonnes per day.

“Due to the gas shortage, furnace oil is now being used to maintain production. This increase costs nearly three times that of gas. If the gas supply does not normalise, the amount of loss will continue to rise,” Tapan Sengupta, deputy managing director of BSRM, told TBS.

Damage in floating LNG terminal aggravates the crisis

The textile factories have been facing an acute gas shortage as one of the two floating LNG terminals in the Bay of Bengal suffered damage from Cyclone Remal which ravaged the country’s coastal areas on 27 May.

According to official documents, industries, power plants, fertiliser factories, and residential areas collectively require approximately 3,700 million cubic feet per day (mmcfd) of natural gas. Of the demand, 2,635 mmcfd is met by domestically produced gas.

Usually, there is a shortage of about 1,000 mmcfd.

However, the damage in the terminal, owned by Summit LNG, is causing a shortage of another 400 mmcfd of gas supply to the national grid, Petrobangla officials said.

They said it would take time to restore the gas supply from the damaged LNG terminal as one of the floating storage and regasification units (FSRU) was sent to Singapore for repairs.

Md Kamruzzaman Khan, director (operation and mine) of Petrobangla, told TBS, “One FSRU has been sent to Singapore for repairs. The repairs may take until mid-July to complete.”

He did not express any hope for improvement in the situation immediately. “We have to get used to this. There are many more connections given than the amount of capacity available. That caused this crisis.”

BTMA sends letter to Petrobangla

On 4 June, the BTMA sent a letter to Petrobangla Chairman Zanendra Nath Sarker, requesting a swift resolution to the situation.

In the letter, the association mentioned the names of the affected areas and informed that gas pressure in the mills has been between 0 and 2 PSI for the past month. As a result, keeping the mills operational has become impossible. Additionally, many expensive machinery have been damaged.

“If this continues, we are concerned about how much longer the mills can remain operational,” reads the letter.

BTMA President Mohammad Ali Khokon told TBS, “If this continues, covering the shortfall is not economically feasible for industries. In such circumstances, how would they repay their debts to banks?”

Gas price increase didn’t guarantee uninterrupted supply

At the beginning of 2023, the price of gas for industries was doubled. At that time, the Ministry of Energy and Mineral Resources said the price hike was aimed at ensuring uninterrupted supply. However, industry stakeholders say the commitment has not been fulfilled.

“While doubling the gas price in January 2023, the government assured us of uninterrupted supply to factories. But, despite increased bills over the past year, the supply has never reached the desired level,” said the BTMA president in the letter to Petrobangla.

Four-pronged problems for textile industry

Entrepreneurs say gas prices have risen while the crisis persists, compounding the problem. Additionally, decreased demand for garments globally has led to fewer orders in the textile industry, while prices of goods have also decreased. Banks are not opening LCs (letters of credit) on time for imports due to the ongoing dollar shortage amid the country’s dwindling forex reserves.

Mohammad Hatem said production costs have increased, but customers are demanding lower prices for garments.

Based on personal experience, he mentioned, “At the break-even point, after setting the price of each unit of clothing at $2.5, the buyer has imposed a condition to reduce it by $0.07.”

He went on to say, “Again, we can’t open LCs at the bank. Harassment at customs persists. It has created an intolerable situation for us.

“Around 80% of garment factories are currently in the ICU [intensive care unit]. Some of them may not survive in the long term.”