The production cost of electricity is falling with the fall in international oil prices, but the government is not reducing its prices. On the contrary, the Bangladesh Energy Regulatory Commission (BERC) has indicated a fresh raise in the electricity prices.
In March last year, the consumers were slapped with a power tariff hike as the energy regulator raised electricity prices by 6.96 per cent. That was the sixth hike in power prices in two years. The BERC claimed that the fresh rise was made to help distribution companies cut losses.
The latest hike took the average price of a unit of electricity to Tk 6.15 from Tk 5.75 at the consumer level. Following the hike, a household consuming 250 units of electricity are paying Tk 68 more than it previously did. Previously, the Awami League-led grand alliance government increased the tariff five times between 2011 and 2012.
The Power Development Board (PDB) gets electricity at a much lower price from the government-approved private power companies who use furnace oil. However, the proposal of PDB to increase the price of electricity price does not reflect that price. In the proposal, the government-fixed oil price was shown and that the BERC is processing the proposal to raise its prices on the basis of that oil price.
Reports say the government so far gave approval to 11 rental and quick rental power companies to import furnace oil for their use. Six to seven of the companies have already started importing the fuel. Almost 730 megawatts of electricity is now generated through the imported fuel.
On an average, the PDB is getting Tk 10 per unit of the electricity from the rental and quick rental power projects. The furnace oil costs around Tk 30 to 32 per litre for the companies to generate electricity.
What is surprising is that the power plants using the government-provided furnace oil have to pay Tk 62 per litre. That is why the electricity costs around Tk 16-17 per unit for them. If the price of the furnace oil is balanced with the international market, the average electricity production price of the rental and quick rental power plants will come down to Tk 10 per unit, which is equal to the price of the coal-based power plants.
According to power sector analysts, the average electricity production cost of some companies has come down to Tk 6.0 from Tk 6.5 because of the low fuel price. The fuel-based power plants in the country are producing more than 2500 megawatts of electricity. The average power production cost will come close to Tk 5.0 if all of them avail fuel at low price. As a result, electricity prices should not be increased, they observed.
In the last public hearings early last year, the price of gas was proposed to rise at least 20 per cent, and the electricity price to rise 5.0 to 6.0 per cent. But until then, the authorities preferred to remain silent.
However, a meeting took place at the Prime Minister's Office (PMO) about the proposed increase in electricity price. Certain complications regarding the price hike were discussed. It was argued that the increase in the price was justified despite the fall in oil prices in the international market. The government's plan to subsidise liquefied petroleum (LP) gas, along with increasing the gas prices, was also discussed.
As the trend suggests, price of petroleum products is likely to fall further in the international market. One of the reasons is the possible lifting of embargo on Iran by the US and its allies. Iran was unable to sell oil in the international market because of embargo. The flow of oil in the global market will go up substantially, with its prices going further down. Reports say Iran has offered to take substantial amounts of jute bags from Bangladesh if it agrees to buy oil from Iran.
Meanwhile, consumer groups and businesses have called upon the energy regulator not to hike power tariff any more as the global oil prices have halved in the last six months. The global oil prices have fallen drastically, so there is no reason why both bulk and retail power tariff should rise, they said.
The Consumers Association of Bangladesh says the low-income people are already under pressure from rising living costs. So more pressure should not be piled on their shoulder by increasing power tariff.
Business leaders say any increase in electricity tariff will have a negative impact on inflation, worsening the condition of fixed income people and small and medium enterprises. Hence, it will not be wise to increase power tariff as the hike may affect the country's competitiveness in the international market. Any hike would have a multiplier effect on the people and will definitely hit the poor very hard, they observed.
Analysts say when the bulk tariff rate was last increased in September 2012, it was stated that power consumption would grow by 20 per cent, but in reality it grew less than 10 per cent. Since less electricity was generated, Tk 45 billion was thus saved, which should have contributed to making the electricity sector profitable. As such, common people's demand to reduce the power tariff is logical. The government is not utilising the opportunity at all, they added.
The country's gas reserves are dwindling fast and the nuclear power plant and the large coal-fired plants are unlikely to be ready before 2020. And hydropower does not offer genuine potential now. Bangladesh has no other choice but to continue to produce electricity from imported oil until 2020 and go for all-out hunt for hydrocarbon in the offshore areas of the Bay.
Without streamlining a sector devilled by widespread corruption, mismanagement and anarchy, it is a pertinent question as to why the government should go for power tariff hike again when global oil prices are cheaper than ever.
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