STAR BUSINESS REPORT

The country’s steel manufacturers yesterday urged the government to reverse the recent electricity tariff hike, warning that it will increase production costs, push up steel prices and slow economic activity.

The government raised electricity tariffs for industrial consumers by about 17 percent, effective from June. Industry leaders said the move comes at a time when steelmakers are already struggling with weak demand, high borrowing costs, a weaker taka, gas shortages and difficulties in opening letters of credit.

“The new tariff alone will increase steel production costs by around Tk 1,785 per tonne,” said Mohammad Jahangir Alam, president of the Bangladesh Steel Manufacturers Association (BSMA), at a press conference at the Jatiya Press Club in Dhaka.

He added that when VAT, port charges, fuel, transport costs and higher raw material prices are included, the total additional cost could reach Tk 3,560 per tonne, while overall production costs have already increased by nearly Tk 5,000 per tonne.

Alam warned that the price of 60-grade MS (mild steel) rod, the most widely used steel product in construction, is currently Tk 91,000 to Tk 92,000 per tonne at the retail level and could rise to at least Tk 97,000 per tonne.

“The burden will fall directly on the construction and infrastructure sectors. Higher project costs could slow both public and private investment and ultimately weigh on overall economic growth,” he said.

The BSMA said the sector has attracted over Tk 1 lakh crore in investment and employs around 10 lakh people.

It added that Bangladesh has about 40 modern steel mills and over 150 re-rolling mills, with a combined annual production capacity of around 1.22 crore tonnes, while domestic demand is only about 50 lakh tonnes a year, meaning mills are operating at less than half of their installed capacity.

Alam also said steelmakers have made significant investments in their own power infrastructure, including 230kV, 132kV and 33kV substations, allowing them to receive electricity directly and avoid adding to distribution losses.

Referring to a recent public hearing by the Bangladesh Energy Regulatory Commission, he said the Bangladesh Power Development Board admitted that high-voltage consumers like steel mills face almost no system losses and are profitable customers.

Despite this, electricity tariffs have increased by around 60 percent to 70 percent over the past five years.

Alam urged the government to withdraw the latest tariff hike and gradually reduce annual capacity payments of Tk 40,000 to Tk 50,000 crore, warning that further cost increases could threaten the sustainability of the steel industry.

BSMA Secretary General Sumon Chowdhury also called for a review of recent electricity price hikes and a reduction in capacity payment burdens, saying these measures are weakening the competitiveness of local industries.

“Reducing electricity costs is essential for sustaining industrial growth,” he said.

According to Chowdhury, capacity payments to power producers rose from Tk 32,000 crore in the fiscal year (FY) 2023-24 to nearly Tk 42,000 crore in FY2024-25.

He suggested reviewing these costs and renegotiating power contracts to reduce pressure on both industries and consumers.

Chowdhury also proposed revising or cancelling costly power sector agreements, phasing out expired rental and quick-rental power plants, and reducing the country’s reserve generation margin to below 25 percent.

He further called for greater energy diversification, including higher investment in renewable energy and reduced dependence on imported fuels and LNG.

He also urged greater transparency in public spending and stronger engagement between policymakers and business leaders to support industrial growth and protect the economy.

BSMA Vice President Maruf Mohsin said ferroalloy is a key raw material used in steel production and has been manufactured locally for the past 17 years, helping the country save millions of dollars in foreign exchange by reducing import dependence.

He said the production process is highly electricity-intensive, and any further rise in power costs would significantly reduce profitability, putting ferroalloy producers under severe financial pressure and potentially forcing some plants to shut down.

Former BSMA president Manwar Hossain, former vice president Sk Masadul Alam Masud, and BSRM adviser Kazi Anwar Ahmed were also present at the conference.