The Energy and Mineral Resources Division issued a gazette raising gas prices by up to 178.9% for public, private and captive power plants, as well as for industries and commercial users. The move is in line with the IMF’s recommendations to reduce subsidies in the energy and power sector, and is effective from February 1, 2023.

Point-to-point inflation in Bangladesh reached 8.71% in December 2022, after hitting an 11-year high of 9.52% in August 2022. We view that this gas tariff hike could further the inflationary pressure by driving up overall costs of production.

We also view that manufacturing companies especially in textile, cement, ceramics and steel sectors will be affected negatively as gas tariff has been increased by 150.4% for large industrial consumers. The following table shows gas cost as percentage of revenue as well as probable impact of price hike on gross profit margin (GPM), considering other things to remain unchanged, for listed companies in those sectors.