Simultaneous hike in prices of power, gas, oil likely soon

FE Team | Published: July 23, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

S M Jahangir
A decision on the simultaneous hike in the prices of power, gas and petroleum is likely to come soon amid the fear of its consequences for the overall economy.
"The proposals for upward adjustment of the prices of electricity, natural gas and petroleum oil are now awaiting the approval from the highest level -- the council of advisers," an official source said.
The Ministry of Power, Energy and Mineral Resources has already submitted the proposals to the council of advisers against the backdrop of losses faced by the state entities on account of selling the fuels and electricity at reduced rates, sources mentioned.
A senior official said the Power Division recently placed a fresh proposal on the rise of electricity tariff to the advisory council for approval.
"We have already put forward the proposal on the price hike on electricity to the advisory council in line with the recommendation of a high-powered committee in this connection," the official said.
Official sources, however, said the committee, headed by the Adviser in charge of the Ministry of Power Tapan Chowdhury, recommended a fresh hike of the electricity tariff in line with the possible increase in the prices of natural gas and petroleum oil.
An official indicated that around 10 per cent hike in the electricity price had been recommended proposed to help offset the operating losses of the state-run distributing agency -- the Power Development Board.
The official also said the proposal has been made in such a way that the poorer segment of power consumers get special concessions from the possible price adjustments.
After reviewing the Power Division's previous proposal, the Council Committee on Economic Affairs at its June 4 meeting with Finance and Planning Adviser Mirza Azizul Islam in the chair had formed the committee to examine the proposal for further enhancement of electrify tariff.
Giving emphasis on a thorough scrutiny of the proposed hike of the power tariff, the finance adviser said that the government needed to evaluate whether any fresh upward adjustment could upset many or not.
The energy adviser recently told the media that the government would have to enhance the power tariff, simultaneously with the price adjustments of oil and natural gas.
He observed that since the price of natural gas was linked with the generation cost of electricity, the power tariff would go up provided the price of natural gas was increased.
The interim government had raised the power tariff by 5.0 per cent from March 1 last for all types of consumers -- residential, industrial and agricultural.
Despite such an enhancement, the major development partners, especially the World Bank and the Asian Development Bank, are pressing the government hard for further upward adjustments of utility prices.
On the other hand, the Energy Division had also placed a proposal on enhancement of gas prices to the council of advisers to help reduce the losses incurred by the state-run gas and petroleum companies, sources said.
The proposal for increasing oil prices has been made in order to help reduce the sustained losses of the state-rum Bangladesh Petroleum Corporation.
"The BPC is incurring losses over Tk 9.50 on sale of per litre of diesel and Tk 9.0 on kerosene due to the rise in oil prices in the international market," a senior Energy Division official said.
Early last month, the Energy and Mineral Resources Division (EMRD) also placed a proposal to the council of advisers to increase gas prices for all the local consumers to reduce the price gap between its purchase and sale.
Currently, the parent gas company - Petrobangla - purchases gas at US$ 2.50 per unit (1,000 cubic feet) on an average from the international oil companies (IOCs) and sells at $1.50 per unit, resulting in a loss of $1.0 for per unit of gas, a senior EMRD official said.
The Energy Division had proposed for raising the gas prices for domestic users by 25 to 36 per cent, for bulk consumers by around 10 per cent and for compressed natural gas (CNG) by around 77 per cent.
Gas prices for a single-burner would be at Tk 475, instead of the existing Tk 350 a month, and for a double-burner at Tk 500 from the existing Tk 400 at the level of domestic consumers, according to the EMRD recommendations.
The gas prices for bulk consumers like power plants, fertiliser factories, captive power plants, industry, tea-estate, and commercial would go up by 10 per cent.
Per cubic metre gas prices for power plants, fertiliser factories, captive power plants, industry, tea-estate, and commercial consumers are now at Tk 2.61, Tk 2.24, Tk 3.73, Tk 5.23, Tk 5.23 and Tk 8.23 respectively.
The energy division recommended that the price of CNG would be increased by around 77 per cent from Tk 8.50 per CM to Tk 15 per CM.
The previous government in January 2005 increased the gas prices for domestic and bulk consumers. The CNG price was last increased in July 2004.
Meanwhile, some experts along those working with the Centre for Policy Dialogue, a local think-tank, have already criticised the government's current move to increase gas, power and oil prices.
They argued that any further hike in their prices would create an adverse impact on the economy, also pushing up the rate of inflation.