Govt plans to double power subsidy

The government plans to almost double power subsidies in the revised budget for FY 25 by diverting funds from its development part, finance ministry officials say.
They say electricity subsidy allocations will be increased to around Tk 650 billion, up from Tk 360 billion earmarked in the original budget.
Nearly Tk 300 billion might be diverted from the development budget to the power subsidy allocation in the national budget, a ministry official told The Financial Express.
"We want to cut the development budget and utilise the saved amount for power subsidies. Our objective is to clear the payments owed to independent power producers (IPPs) and rental power plants within a couple of years," he said.
"If we can significantly slash the development budget, that money will be added to subsidy allocations in the upcoming revised budget for FY25," the official added.
Almost all of the current Tk 360 billion electricity subsidy allocation is being spent on paying capacity charges and other relevant ones to IPPs and rental power plants.
The previous Sheikh Hasina-led government allowed many private power producers to set up plants. Most of the plants are costly in terms of electricity pricing, resulting in rising government liabilities.
Bangladesh Power Development Board (BPDB) purchases electricity from IPPs and usually sells it to consumers at lower rates. Subsidies are used to fill the gap.
Most of the IPPs and rental power plants are HFO- or diesel-based, which is costly.
To supply to the national grid, BPDB purchases electricity from private plants at a cost ranging from Tk 14 to Tk 26 per kilowatt hour.
On the other hand, the average retail price of electricity for consumers is around Tk 8.95 per unit, and the average bulk power price is Tk 7.04 per unit.
The government in FY23 spent Tk 280 billion on capacity charges paid to the favoured power producers. It also issued special bonds in recent months to clear IPPs' and rental plants' capacity charges.
Another finance ministry official said the government plans to raise power subsidies in the revised budget to pay outstanding bills as much as possible in a bid to have a strong financial footprint.
He said the visiting International Monetary Fund delegation had met Bangladesh Energy Regulatory Commission officials and the power adviser on Monday to discuss subsidies as well as energy policy issues and strategies.
The delegation is trying to understand the government policy on subsidies and the roadmap for phasing out grants in the national budget.

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