Power tariffs at both bulk and retail levels are planned for serial hikes to phase out government subsidy in three years, under reforms which economist say would further add to people's cost of living.
The Prime Minister's Office (PMO) recently approved a proposal prepared by the Finance Division under the Ministry of Finance for adjusting power tariffs to level close to production cost to make sure the requisite subsidy for power sector turns "zero or around zero", a senior finance official told the FE Tuesday.
Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) will take necessary measures to decide the extent of tariff hikes and timelines to ensure that the country's power sector be subsidy-free, he said.
Sources have said the Finance Division has so far provided Tk 57 billion to state-run Bangladesh Power Development Board (BPDB) only in the current fiscal year (2023-24) as subsidy to facilitate electricity purchase from power producers.
Over the years, the Finance Division has provided subsidy for the BPDB to purchase electricity from the producers as its purchasing cost of electricity from power-plant owners is higher than its selling prices to different power-distribution companies and the consumers.
Higher electricity-generation costs of different power plants, including independent power producers (IPPs), small IPPs, and rental-and quick-rental power plants are forcing BPDB to buy electricity from them at higher rates, a senior BPDB official said.
Outstanding subsidy requirement of the BPDB as of June 2023 stands around Tk 98.30 billion, which had soared to around Tk 256.54 billion until September in the past year, the official added.
Turning the country's power sector subsidy-free is one of the preconditions a multilateral donor agency -- the International Monetary Fund (IMF)-has set in its lending package, said sources.
The IMF recently approved a $4.7-billion loan to Bangladesh on condition that the country continue to rein in heavy subsidies to the energy sector, the lion's share of which goes to the electricity sector, followed by natural gas.
Although Bangladesh has been raising domestic fuel and energy prices, the IMF has said Bangladesh's subsidies for gas and electricity combined are expected to reach about 0.9 per cent of GDP in the 2023 financial year compared with 0.4 per cent of GDP in the 2021 financial year and 0.5 per cent in the 2022 financial year to reflect elevated global commodity prices.
The IMF says, "In addition, bar further global price shocks, the Bangladesh authorities have committed not to increasing these subsidies during the programme and exploring options to gradually reduce them further, while scaling up social- protection schemes."
Officials say the government last year raised electricity tariffs thrice at retail level in three consecutive months -- January, February and March -- by around 5.0 per cent each time to reduce price gap between electricity generation and sales.
Prior to these hikes, state minister for the Ministry of Power, Energy and Mineral Resources (MPEMR) Nasrul Hamid had announced hike in power tariffs every month.
"But, after March 2023, the government did not raise power tariffs for reasons not known," said the BPDB official.
The government also had hiked natural-gas tariffs by up to 178.88 per cent since February 2023 to cope with the mounting liquefied natural gas (LNG)-purchase costs.
The government also had raised bulk electricity tariffs by up to 7.36 per cent across the board with effect from February 1 2023.
The Power Division and the Energy and Mineral Resources Division (EMRD) under the MPEMR had raised the power and natural gas tariffs by administrative orders amending the Bangladesh Energy Regulatory Commission (BERC) Act to assume rights of adjusting gas and power tariffs bypassing public hearing and the BERC, a senior BERC official said.
The BERC previously had hiked natural gas and electricity tariffs after holding public hearings
Currently, the tariff for lifeline power consumers, who use up to 50 units (kwh) a month, is Tk4.35 per unit.
The electricity tariff for the consumers who use 0 to 75 units is Tk4.85 per unit and the tariff for 76 to 200 unit users is Tk6.63 per unit.
Electricity users of 201 to 300 units are paying Tk6.95 per unit.
Tariff rates for 301 to 400 unit users are Tk7.34 per unit and for 401 to 600 unit users is Tk11.51 per unit.
Electricity tariff for the retail-level consumers who use electricity above 600 units is Tk13.26 per unit.
Contacted for his view of the move, vice-president of the Consumers Association of Bangladesh (CAB) Prof M Shamsul Alam termed the government raising power and natural-gas tariffs by executive order a 'bad example', which he said "will encourage widespread corruption and irregularities in the power sector".
"This move will be detrimental to the accountability and transparency which is being established by the BERC's public hearing," he said.
He fears that the power-price hike would have cascading effect on life and business, at this trying time. "It will fuel up the already-inflated inflation further," says the consumer-rights campaigner.
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