Energy price raise ultimately lessens burden on people, says govt

The upward adjustment of energy prices will ultimately minimize the burden of increasing subsidy on the people as expenditure comes from public coffer. As the subsidy is being managed through imposing taxes on people, burden of taxes on the people increases with the rise in subsidy expenditure, said an official handout, reports BSS. Subsidy does not come from any foreign sources as grants rather it is collected from our own internal sources and loans, it said. Power Development Board (PDB) and power distribution organisations face huge losses if power tariffs are not adjusted timely. The country's electricity demand rises from 8 to 10 per cent annually and PDB's average cost for supply of per unit power was Tk 2.62 in 2009-10 which increased to Tk 4.15 in 2010-2011. When fuel-fired power units will generate 500 mw electricity in 2011-12, the per unit power supply cost will stand at Tk 4.86. "Rising furnace oil price in the international market, increasing use of fuel for power generation and power purchase from private producers are pushing up the cost of power generation," the handout said. Subsidy expenditure is increasing due mainly to a rise in fuel prices in the international market. For power sector, subsidy expenditure varied between Tk 5.0 billion and Tk 10 billion from 2002 to 2008 but it has stood at Tk 100 billion in 2011 against the current budget's allocation of Tk 52 billion. Bangladesh Petroleum Corporation will face a loss of Tk 170 billion in 2011-12. PDB has taken steps to construct new power plants and purchase of electricity from rental power plants and independent power producers to meet the emergency demand of electricity. It has taken a year-wise plan to increase its power generation capacity to 11,000 mw by 2015. If consumers do not pay a rational price for the use of electricity, the government has to adjust the price through providing subsidy, it said and added that for this reason, people are subjected to dual injustices: (1) the gap between the actual power production cost and tariff the customers are paying is being met through subsidy. Due to limited state resources and income, the government cuts allocations from the priority sectors for collecting fund for the subsidy. As a result, beneficiaries from those priority sectors are deprived of their due facilities, (2) when the government meets subsidy expenditure from the public exchequer; it actually takes such financial support from the reserved fund of the people. It means, 48 per cent people are enjoying electricity at the taxes paid by 52 per cent people who are not getting such facilities. According to economists, increasing trend of subsidy fuels inflation. Subsidy expenditure is gradually increasing forcing the government to take thousands of millions taka in loans from commercial banks that is creating liquidity crisis in the banking system. As a result, private entrepreneurs are not getting necessary capital that could not only slow down effort to set up new industries but also squeeze employment generation.