SMEs to suffer more due to gas price hike

The cost of production in small, medium and cottage industries will jump overnight as the gas price was suddenly hiked without holding any public hearing. Consequently, the consumers will have to pay more for the goods than before, said business leaders.

The gas price was increased the most for the small and cottage industries – from Tk10.78 to Tk30 per cubic metre – a 178% jump. For the medium industries, it jumped from Tk11.78 to Tk30 per cubic metre – a 155% increase.

Entrepreneurs yesterday told The Business Standard that the local economy will face more inflationary stress due to the gas price hike as it will drive up the prices of nearly everything.

Kutubuddin Ahmed, a former president of Metropolitan Chamber of Commerce and Industry (MCCI), said small and medium enterprises (SMEs) will suffer more for the gas price hike as it is different from the export oriented industries.

He said the price hike will worsen the inflation situation, affecting all the sectors as well as individuals, because entrepreneurs will pass their additional cost to consumers.

Kutubuddin Ahmed feared that the prices of commodities including rice, oil, lentil, wheat and flour would jump in the local market as a result of the gas price hike. 

Dhaka Chamber of Commerce and Industry President Sameer Sattar told TBS, "The government had to increase the gas prices due to unavoidable reasons. It is a good thing that the price hike will not have any immediate impact on households, agriculture and fertiliser sectors as the hike is not applied to them."

"However, the move will impact industries, regardless of their size, as they may lose their competitive edge due to the jump in their cost of production," said Sameer Sattar.

"When we were recovering from Covid-19 pandemic's effects, the Russia-Ukraine war created further uncertainty in the global economy, therefore any type of additional cost will create a burden for the private sector," he added.

Shams Mahmud, a former president of DCCI said, "Internal economy will face more inflationary stress as prices of nearly everything will increase. On top of that VAT will be collected.

"Also we understand the government cannot give us subsidies forever. But we have not yet seen any long term road map for energy price increase so that we can plan better for future shocks."

Shams Mahmud further said, "We see no government drive against illegal gas and electricity connections and measures to improve the efficiency of state-owned gas-fueled power plants. This will have a detrimental effect of foreign direct investment and private sector credit growth."

Lastly, the gas price hike is contradictory in nature because there is already a moratorium on loan repayments for businesses which are struggling to make repayments. So increasing gas prices now will have more negative impacts on the financial sector, added Shams Mahmud.