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Bangladesh to raise gas prices to fund development

world Updated: Jul 18, 2009 10:34 IST

DHAKA, July 18 (Reuters) - Bangladesh will raise natural gas prices by up to 15 percent to create a $1.5 billion development fund for the sector, a senior government official said on Saturday.

"The purpose of the fund will be also to reduce the dependence on donor countries and agencies," said Tawfiq-e-Elahi Chowdhury, as adviser to the prime minister responsible for the ministry of power, energy and mineral resources.

Bangladesh faces daily shortages of up to 1,500 megawatts of electricity and 250 million cubic feet of gas, and to cope with the rising demand the country is estimated to need to invest between $1.5 and $2 billion in the sector.

The demand for gas and electricity rises between 7 and 8 percent every year.

The ministry has approved the proposal to raise gas prices and is now waiting for final approval from the Bangladesh Energy Regulatory Commission.

"We need a huge amount of money to invest in the power and energy sector and the initiatives will give positive results within the next two to three years," Tawfiq told Reuters.

Due to shortages of energy at least 300 manufacturing firms in the port city of Chittagong and around Dhaka cannot start production despite investments of more than $1 billion.