Photo : Messenger
The government is contemplating the withdrawal of electricity subsidies through executive orders, bypassing the regulatory body. This move is part of a plan to increase prices by 78 percent, aiming to alleviate the subsidy burden.
The Bangladesh Power Development Board (BPDB) has already submitted an application to the Power Division, requesting an increase in the electricity price from Tk 8.25 to Tk 14.67 per unit at the retail level.
When questioned, Abul Khayer Md. Aminur Rahman, Member (Power) of the Bangladesh Energy Regulatory Commission (BERC), stated to the Daily Messenger, "We haven’t received any such proposal from the BPDB."
Nasrul Hamid, the State Minister for Electricity, informed the Daily Messenger that there is a strategy to adjust electricity prices monthly based on the world fuel market. This indicates that the BPDB has not forwarded the proposal to the BERC for review; instead, the state-owned power board has directly approached the Power Division to increase prices through executive direction.
According to the proposal, the current average tariff stands at Tk 8.25 per unit. However, the predominant bulk rate is Tk 6.7 per unit, resulting in a deficit of Tk 1.55 or 6.61 percent.
In the proposal to raise electricity prices at the consumer level, it is suggested that the bulk price should be elevated from Tk 6.70 per unit to Tk 12.11 per unit, aiming to eliminate the subsidy entirely. However, the power board is currently burdened with outstanding bills to Independent Power Producers (IPP) amounting to Tk 28,000 crore. Due to a funding crisis, the Bangladesh Power Development Board (BPDB) is struggling to settle these bills, and IPPs have issued warnings about potential power generation interruptions.
As per the recommendation, if the proposal to increase the bulk price is approved, there is a plan to increment the bulk price by 5 percent each month from February to December, gradually reducing the subsidy to zero. It is noteworthy that the International Monetary Fund (IMF) has directed the elimination of subsidies in the power sector by January 2025.
In light of this, to address the existing deficit at the retail level, a suggested approach involves an 11 percent increase in electricity prices in February. Subsequently, prices would rise by 4 percent from March to November and by 10 percent in December.
"The global fuel market is experiencing an unusually high price surge. Considering this, if gas prices are raised at the consumer level, it could lead to increased instability in the public life of the country," warned Professor Shamsul Alam, the energy advisor of the Consumers Association of Bangladesh (CAB), in a statement to The Daily Messenger.
He further emphasized that consumers might not benefit from a later reduction in gas prices, citing past instances where, despite falling fuel prices, transport fares remained unchanged. Professor Alam advocated for patience, suggesting a wait-and-see approach to observe the world market before adjusting gas prices.
The last increase in gas prices at the consumer level occurred on June 5 of the previous year, with a hike of over 22 percent. Despite this adjustment, distribution companies claimed losses, prompting efforts to raise gas prices again before the year's end. The Energy Division is currently working on this matter, and an executive order may announce the gas price increase in May, similar to electricity.
Under the Bangladesh Energy Regulatory Commission (BERC) Act, relevant ministries, including the Ministry of Electricity, Energy and Mineral Resources, have the authority to determine, re-fix, and coordinate fuel oil, electricity, and gas prices at the consumer level. Mohammad Hossain, Director General of Power Cell, highlighted the substantial increase in the electricity subsidy, from Tk10,000 crore to Tk12,000 crore to Tk40,000 crore, due to the rise in fuel prices in the international market. He explained that despite a 20 percent increase in wholesale electricity prices, distribution companies need to raise consumer prices by a similar margin to avoid losses.
In the previous fiscal year, the subsidy for electricity amounted to about Tk30,000 crore, and the Energy Division has sought Tk44,000 crore for the current fiscal year. An anonymous member of BERC mentioned the pressure to increase gas prices, noting that the exact amount of the increase is yet to be determined, with gas distribution companies reportedly requesting a margin hike.
Messenger/Fameema
