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BENEATH THE SURFACE

Gas and grievous game

ABDUL BAYES
***My personal calculations tend to say that gas alone contributes to one-tenth of the GDP directly, and more so, indirectly. We should also develop gas-related institutions in such a fashion where there will be less wastage, less trade unionism, and more punishment for offences. Raising prices is a necessary but not sufficient condition for feeding a fragile plant or enterprise. Economics is all about reducing the cost of production.***
DESPITE the recent resentments prevailing in citizens' minds following the failures in gas supply situations, I pick up the pen to write about the gas-poverty nexus. I am not, for that matter, oblivious of the fact that the energy sector in general and the gas sector in particular has long been reeling under the grievous governance. Gas is the dominant natural resource in Bangladesh and every citizen -- poor or rich -- should have access to it. However, most of our perceptions, policies, priorities, and practices pertaining to the energy sector have allegedly been pro-rich and pro-urban. Allow me to demonstrate the "discomforts" with a few examples.
The scarce natural resource is not being distributed equitably throughout the country. For example, a double burner gas in urban areas costs five times less than equivalent energy from LPG and four times less than the alternative kerosene fuel. This means that a poor household in Ashugonj with access to piped gas is richer than a poor household, say, in the western part of the country where gas is yet to go. Or, a rich household in the western part is poorer
than a rich household from Ashugonj.
Only 6 per cent of the households are connected with gas and most of them reside in urban areas. The subsidy on domestic consumption amounts to something like Tk. 22 billion per year or 74 per cent assuming kerosene as the alternative fuel and 79 per cent assuming LPG as the alternative fuel. This means that the urban rich are seizing upon the subsidy, and inequality increases among the different segments of the society.
Only 12 per cent of the households from the bottom fifth of income distribution and 21 per cent of the second lowest quintile have access to electricity. Most of the households of the top quintile have access to electricity. That means access of the poor to electricity is very poor in a regime of poor national access to electricity (30 per cent, on average).
Total energy use by the poor in the east costs Tk.500 per month, which is 65 per cent lower than that in west.
Energy prices are higher in areas with high incidence of poverty.
The Asian Development Bank (ADB) and Petrobangla are jointly holding a workshop in the city on the issue of transmission of gas to the
north-western part of the country. The idea sounds sensible in the wake of the feeling of a "not so big domestic market" for piped gas. Initially, the euphoria of exports prevailed and the donors decidedly stood in favour of exports and utilization of the earned foreign exchange for furthering economic causes of the country. However, enthusiasm soon dissipated, paving ways for a practical outlook on the sector. Therefore the ongoing ' workshop could be termed as timely and tuned to the domestic demand side of the gas supply. However, as the transmission would involve huge sums of investment, quite obviously, a serious brain-storming session should be in order with a view to capture the socio-economic ramifications of the transmission and distribution of gas to that part of the country.
I am concerned with the gaspoverty nexus. Would gas supply help the poor -- accounting for roughly 60 per cent of the households -- of that region? To this effect, I would like to draw upon some empirical evidence.
We have observed that per capita income of households with gas and electricity is roughly 30 per cent higher than those without these facilities, that is, in control areas. It
could also be noticed that about 70 per cent of the household income in the former originate from non-agricultural pursuits compared to roughly 55 per cent the control areas. With access to gas, the cost of cooking comes down by 25 per cent or so. There could be in evidence growth of markets, banks, and NGOs, and increasing economic transactions in the former than in the latter. The irrigation cost ,is 30 per cent lower in target areas than in control areas. People perceive that due to gas and electricity, good teachers are available in the locality and there is seemingly a reverse migration. Women and children in control areas spend, on average, 3-5 hours a month in fuel collection that apparently reaches zero with gas access. The children in target areas study for more hours at night than those in control areas, and importantly, people in target areas are found to be more informative about market conditions than the control ones.
In both target and control areas, access to gas is perceived to be an important input to the improvement of livelihoods. Eighty per cent of the poor (having a poverty level income of Tk.6000 per month) desire access to piped gas. They are willing to pay Tk.400-450 per month
as gas bill. About the connection cost of say Tk.10,000, one-third of them agreed to pay instantly from their own or borrowed sources, but the rest requested for arrangements of payments through installments.
By and large, it seems that there is a willingness to pay for gas supply, even by the poor. Our econometric analysis shows that access to electricity affects poor households' income and the effect is highly statistically significant. Access to gas also affects their income but at 10 per cent level of significance. One would then conclude that access to electricity and gas is the prime mover of the poor's pie. The government should take that into cognizance and come up with such pro-poor projects.
Leaving aside the poor, access to gas and electricity could contribute to further development of the region. Just remember the contribution of the Bangabandhu Bridge over Jamuna. The bridge seemingly bridged the socio-economic gap between the regions. The supply of gas and electricity along with it could help product and factor mobility across regions at an increasing rate, equalize prices, and contribute to balanced regional development. The intents expressed by the Tata group of industries to set up gas-
based industries in that part of the country only goes to emphasize the point.
It is not merely the issue of demand and supply. We need to revisit our perceptions about the whole gas sector, especially gas economics. Natural resource economics generally does not follow the micro and macro economic principles and our universities should teach a subject like gas economics. Intuitively speaking, gas has a greater contribution to GDP than generally perceived. What about CNG transport, fertilizer factories, and power plants? My personal calculations tend to say that gas alone contributes to one-tenth of the GDP directly, and more so, indirectly. We should also develop gas-related institutions in such a fashion where there will be less wastage, less trade unionism, and more punishment for offences. Raising prices is a necessary but not sufficient condition for feeding a fragile plant or enterprise. Economics is all about reducing the cost of production. One has to think about reduction in costs. I suggest a value chain analysis on the cost components of the gas-related business.
Once the north-western part of the country is provided access to gas and electricity, I strongly suspect that the poverty-stricken areas would benefit immensely and the country would reach its Millennium Development Goals of poverty reduction.
Abdul Bayes is a Professor of Economics at Jahangirnagar University.