Bangladesh commission recommends electricity price hike by 58%

Business leaders and consumer rights associations said such a major hike would not only affect the prices of daily essentials but also hurt export and industrial production.


May 19, 2022

DHAKA – The technical evaluation committee of Bangladesh Energy Regulatory Commission yesterday recommended increasing the bulk electricity price by 58 percent.

Business leaders and consumer rights associations said such a major hike would not only affect the prices of daily essentials but also hurt export and industrial production.

The committee made the recommendation at a public hearing at the capital’s Biam Auditorium on BPDB’s proposal to increase the power price.

The regulatory commission Chairman Abdul Jalil said a decision regarding the price hike will be announced within 90 days of the hearing.

If the recommendation is accepted, the Bangladesh Power Development Board (BPDB), which buys electricity from the power plants, will sell 1kWh of electricity to the distributors for Tk 8.16, up from the current Tk 5.17.

“The prices of essentials have risen. People are worried about the future. Their savings are depleting, which may affect investments. If the electricity prices rise, the economy, agriculture, industries, production and service sector will be affected,” said Mostofa Azad Chowdhury, senior vice president of Federation of Bangladesh Chambers of Commerce and Industries.

The Covid pandemic and Russia-Ukraine war are already making import of raw materials more difficult and raising production costs, he added. “It has  become harder [for export-oriented businesses] to survive the competition.”

At the hearing, the BPDP said electricity generation cost Tk 8,180 crore more in the 2020-21 fiscal year, compared to the previous year, because the plants had to use furnace oil amid the shortage of gas, which is cheaper.

CFK Mosaddeq, general manager (commercial operation) at the BPDB, said it had a deficit of Tk 30,251 crore in its annual budget because of the withdrawal of 6 percent tax relief on furnace oil in June, imposition of new VAT and taxes on fuel, and 5 percent VAT on imported coal.

In his counterargument, Prof M Shamsul Alam, senior vice president of Consumers’ Association of Bangladesh, said the government was making the energy and power sector commercial and considering it as the main source of revenue.

The prominent energy expert said the BPDB could address its deficit without putting the burden on the people.

Withdrawing the newly imposed taxes on furnace oil and coal, reinstating the tax break for fuel, and importing fuel directly through Bangladesh Petroleum Corporation (BPC) could save the government at least Tk 8,833 crore a year, said Prof Shamsul.

The BPC sets the fuel, i.e. furnace oil, prices on its own, he said, adding that it was illegal and illogical.

By withdrawing the BPC’s recent price hike and reducing the dependency on the expensive privately-owned quick rental plants, the government could save another Tk 14,238 crore, he said.

He alleged that the cost-effective power plants often remained underutilised while the quick rental plants were in use, ignoring the “Economic Merit Order”. “Who is responsible for breaking the order?”

The BPDB’s power plant in Bhola has no gas crisis, he said, adding that if the plant’s 72 percent production capacity were utilised, the cost would have been Tk 2.58 per kWh. But the plant’s 38 percent capacity is being used, raising the per kWh cost to Tk 4.14.

Sometimes, the BPDB’s power plant remains shut “at instructions given over the phone at midnight” just to buy power from a private quick rental plant, Prof Shamsul alleged.

At the hearing a representative of the National Load Dispatch Centre, which controls which plant is operated at what capacity, said no rule was broken on their part. But BERC chairman Abdul Jalil echoed Prof Shamsul, saying, “Breaking the rule is common but we want to know who ordered it.”

Energy expert Prof Ijaz Hossain said the current electricity price was set in 2020.

“Without stability in prices, how would one do business? There was a gas crisis 20 years ago and there is a gas crisis now. But where is the planning? How come nearly 50 percent of power plants are running on oil in 2022?” he asked.

Oil-based power plants are not used anywhere else in the world unless there is an emergency, he said.

Jalil said the commission would consider the proposals and the arguments.

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