Gas supply deal with LafargeHolcim reported to impact Bangladeshi industry

Specialists have raised the red flag over the Bangladeshi government's gas supply deal with LafargeHolcim Ltd as the 20-year agreement has been threatening the competitive advantage of local cement manufacturers, reports the Daily Sun.

Jalalabad Gas Transmission and Distribution System Ltd (JGTDSL) signed the gas supply agreement with the cement major in 2003, but in view of current gas shortages in Bangladeshi households and industries, the government decided on 16 January to review the deal. The demand for gas in the country has been forecast at 3781mmcfd in FY2017-18 while supply is only 2660mmcfd.

"The ministry decided to form a four-member committee to review the deal," said JGTDSL Managing Director, Md Khalequzzaman. The committee was asked to submit its report within 10 working days.

Earlier the Consumer Association of Bangladesh had called upon the government to review the agreement.  "I have first raised the concern last year to review the deal considering the huge difference between the commercial rate and the rates being offered to the cement manufacturer," CAB energy adviser Prof Shamsul Alam. "LafargeHolcim gets tax-waiver for doing business here and they sell their products as per international rate. So the gas tariff should be commercial instead of industrial and captive rates," he said.

Meanwhile, in a letter to the Ministry of Power and Energy, Spanish ambassador in Dhaka, Alvaro de Salas Gimenez de Azcarate, wrote, "It has come to our notice that the company and Jalalabad are presently having differences of opinion on the terms of the gas sales agreement particularly on ceiling price and use of excess gas."

"The gas supplied by Jalalabad under the GSA is the only source of energy for the company," he said, adding that the assurance for the supply of energy is a prerequisite for any foreign investor.

"We are afraid that any contrary position taken by a government/ entity/company may have long-term adverse effects on the Spanish investments," the ambassador said.