Bangladesh’s steel sector leaders have expressed concerns over potential electricity tariff increases, warning of detrimental impacts such as reduced production, financial setbacks, and potential factory closures. The Bangladesh Steel Manufacturers Association (BSMA) highlighted the sector’s existing challenges, including escalating utility costs, subdued demand, high borrowing expenses, and underutilization of production capacity.
President of BSMA, Mohammad Jahangir Alam, emphasized that any further rise in electricity prices would significantly elevate production expenses, leading to possible cutbacks in output and even complete shutdowns for some factories. The association noted that industrial electricity tariffs have surged by approximately 30% in recent years, with gas prices for certain industries soaring nearly 300%, thereby undermining the competitiveness of Bangladesh’s significant manufacturing industry.
Amidst various global and local economic challenges, including the aftermath of the Covid-19 pandemic, disruptions in the global supply chain, geopolitical uncertainties, and exchange rate fluctuations, the proposed electricity tariff hike could exacerbate the woes faced by steel manufacturers.
BSMA criticized the imposition of demand charges, additional value-added tax (VAT), and power factor penalties on industrial consumers, which effectively function as indirect tariff increases. The association also questioned the power sector’s capacity payment system, highlighting the substantial annual capacity charges while industries grapple with escalating energy expenses and insufficient gas supply.
BSMA called upon the government to maintain current electricity prices for the steel sector, reduce demand charges and VAT, reassess power factor surcharges, and introduce specialized tariff schemes for high-voltage industrial consumers. The association emphasized the significant impact of electricity costs, accounting for nearly 30% of steel production expenses, making the industry particularly sensitive to tariff adjustments.
BSMA representatives revealed that the steel sector is witnessing operational losses due to sluggish construction demand, amplified financing charges, and escalating production costs. With production costs potentially rising by Tk 2,000 per tonne, the construction sector could face further slowdowns in real estate and infrastructure activities, as many factories are currently operating at only about 40% capacity.
The association highlighted that annual steel demand in Bangladesh stands at approximately 40-50 lakh tonnes, significantly lower than the installed production capacity of nearly 1.2 crore tonnes. During a press briefing, industry leaders, including Salam Group Chairman Md Rezaul Karim and BSMA Vice-President Sk Masadul Alam Masud, addressed the challenges and sought support to alleviate the sector’s financial strains.
