A 75 per cent increase in subsidy expenditure on power between the months of June and August last has stirred up worries among finance ministry officials.
The ministry of finance (MoF) at its recent meeting has reviewed the issue and decided to discuss it with the Power Division, sources said.
The meeting reviewed a Power Division proposal on payment of subsidy on account of the sale of power to bulk consumers at prices lower than its rates of purchase from the independent power producers (IPPs), rental power plants and quick rental power plants.
In its proposal, the Power Division mentioned that the amount of the required power subsidy for the June-August period of 2014 surged by nearly 75 per cent to reach Tk 26.80 billion over that of the corresponding period of last year, MoF sources said.
The amount of power subsidy paid during the June-August period of 2013 was Tk 15.31 billion, the sources said.
The government purchases electricity from IPPs, rental, and quick rental power plants at higher rates which is supplied to the customers at lower rates, thus incurring a significant amount of financial losses, a high official of the Power Division said.
He added that a large amount of financial loss would be incurred every year for purchasing electricity from the private power plants.
The government has set the target of power subsidy at Tk 70 billion for the fiscal year (FY) 2014-15 with an increase of around 15 per cent from that of the last FY.
The MoF is worried that if the current trend persists the volume of subsidy might cross the allocation made in the budget, an official of the ministry who attended the meeting said.
"Recently, the Power Division sought additional subsidy for the June-August period. However, the fund will be released after identifying the cause(s) for the additional demand and scrutinising price fixation of per unit electricity from the plants," an official concerned told the FE.
Meanwhile, Professor of Petroleum and Mineral Resources Engineering of Bangladesh University of Engineering and Technology ( (BUET) and a leading energy expert of the country, Dr M Tamim, said the amount of subsidy to power sector might have increased due to fuel import cost of private power plant owners.
"Besides, so far as I know, the private importers or the plant owners have to pay a 9.0 per cent commission to Bangladesh Petroleum Corporation (BPC) to import the fuel oil and for using the storage facilities of the BPC," he said.
According to another source, the volume of purchase of power from rental plants in recent months was higher compared to that of the corresponding period of last year. This was done to maintain uninterrupted supply of power, the source added.
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