Bangladesh Energy Regulatory Commission (BERC) is set to hold public hearings with the power distribution companies and other stakeholders next month with a view to increasing gas and electricity tariffs. The commission plans to conduct three hearings -- one on gas price and two on electricity tariff.
Public hearing has, thus, become a part of the process to make periodic adjustments or readjustments of power or gas tariff. But many a times, the government ignores the process. By passing public hearings, it uses to raise the tariffs of the petroleum products through executive orders.
Many are now raising questions as to the usefulness of holding such public hearings. When the government increases the prices through executive orders, it defends itself by saying that the public hearing process is too lengthy and cumbersome and hence the increase in tariff rates is made effective through executive orders. Critics say if the process is too lengthy, why was it followed earlier?
Energy analysts see apparently little benefit from such public hearings. Most of the power distribution companies try their utmost to convince the regulator of the need to hike the prices in the public hearings as per their own plans of action. Representatives of other stakeholders - mainly the consumers - get little time to project their own views and grievances.
However, activists from the Consumers Association of Bangladesh (CAB) do raise some pertinent points that show how the public will immensely suffer in the event of an phenomenal hike of the utility services in one-go way. The aggrieved consumers will have little time for breathing.
On its part, the regulatory body, for obvious reasons, does not want to go beyond the dotted line of the government. In the process, private citizens lose their confidence in pubic hearing as they see no gain out of it.
However, this time around, the retailers and the wholesalers have submitted their proposals to the regulators to adjust the rates from January next year. In favour of their proposals, gas retailers argue that the existing prices are very low in Bangladesh compared to those of the neighbouring countries. The Bangladesh Power Development Board (PDB), the lone wholesale buyer and seller of electricity, says the production cost is higher than retail tariff.
However, the government proposed gas price-hike, up to the level of 122 per cent. The bulk rates of electricity, it reportedly suggested, should increase by 18.12 per cent after a traditional adjustment in retail prices. The gas tariff rate for double burners in households has, thus, been proposed at Tk 1000, up from Tk 450 and that for single burners, Tk 850, up from Tk 400. What an incredible jump, indeed!
To mention, the BERC increased gas tariff rates for all categories of consumers in 2009 also. Later, it increased only that of compressed natural gas (CNG) by 66.67 per cent, from Tk 18 to Tk 30 a cubic metre, in two phases in 2011.
When the gas prices went up in 2009, all additional amount of money that accrued from the hike, went to the Gas Development Fund, not to ease the subsidy burden of the government, reports say.
That time also, the government had defended the hike by claiming that gas tariff was being rationalised with the increased price of fuel oils such as diesel, petrol and octane. In the same year, the government increased prices of fuel oils used in vehicles by Tk 17 a litre in four phases.
As of now, fuel oil prices hit a four-year low in the global markets. But the government did not adjust the fuel oil prices downward, keeping in line with the price-trends in the global markets. The neighbouring countries, India included, are lowering their prices as per the latest global trend. The government did not explain its position as of now.
The average sales rate of 1,000 cubic metres of gas now is Tk 139.62, which the retailers say are much higher in neighbouring countries. They have now proposed increasing the average retail rates by 40 per cent to Tk 195.70 per 1,000 cubic metres, according to reports.
About the proposed price-hike scenario in the power sector, the PDB, as mentioned earlier, has proposed for an 18.12 per cent rise in bulk electricity rates. It sells power to the five retailers at an average rate of Tk 4.67 per kilowatt-hour unit of electricity although the production cost is Tk 6.54 per unit. As such, the government wants to lessen the subsidy burden by hiking power tariffs.
On the proposed substantial hike in household gas tariff, energy experts say this is undoubtedly a major jump. It will add to the poor consumers' woes. The increase for industrial gas use would reduce the overall competitiveness of the manufacturing sector, they said.
If, however, other infrastructural supports were adequate and the cost of capital remained at a single digit level, the industry could have perhaps absorbed the shock impact of the hikes. But at this moment the increase in energy cost will be a huge burden as the export-oriented industries will suffer more as they compete against other countries to procure orders, they added.
The garment sector, as analysts say, is going through phase of a substantial restructuring and entrepreneurs are considering to undertake new investments to meet the international compliance standards. At this juncture, the garment sector should be exempted from further increase in direct expenditures, they added.
Gas and electricity tariff-hikes are sure to enhance the cost of business. The government should not arbitrarily increase their rates since distributing companies can hardly maintain the required supply of energy for smooth running of the industrial units, they said.
The government is, undeniably, under some pressures to accept some conditions such as raising power and gas tariffs from the development partners as they tag to many of their credit programmes. It should, however, properly weigh the fallouts from acceptance of such conditions.
Before any hikes, all options do need to be diligently examined and scrutinised. No decision that concerns the living of the teeming millions should be taken in haste. For all matters, the national interest should come first and that should be the guiding force in taking policy-decisions.
szkhan@dhaka.net
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