Govt to bear Tk 160b loss for BPC, BPDB

M Azizur Rahman The government will have to bear loss of Tk 160 billion on account of state-owned petroleum and power entities alone, apart from its budgetary allocation of Tk 92.86 billion as subsidy for fiscal year (FY) 2011-12, officials said Monday. The government will require the amount in the form of loans to the Bangladesh Petroleum Corporation (BPC) and Bangladesh Power Development Board (BPDB) despite the recent hikes in prices of petroleum products and electricity. Officials said the government's borrowing from banking sector until November already exceeded its target set for the entire FY 2011-12 mainly due to funding for loss-making state-owned entities. "Despite the recent hike in fuel prices, Bangladesh Petroleum Corporation (BPC) will require around Tk 110 billion to import increased quantity of petroleum products from international market," BPC Chairman Md Abubakar Siddique told the FE Monday. He said BPC's funding requirement may change with the fluctuations of petroleum prices in international market. Cash strapped BPC will have to import around 6.50 million tonnes of petroleum products in FY 2011-12, up by 27.45 per cent from the previous FY's 5.10 million tonnes as the government is installing dozens of diesel and furnace oil-fired power plants to ease electricity crsis. BPC's funding requirement from the government for FY 2011-12 is, however, almost double than the previous year's Tk 57.91 billion, a senior energy ministry official said. Cash strapped BPC incurred loss of Tk 82 billion in petroleum trading in FY 2010-11 as the corporation has been continuing its purchase of petroleum products from international market at higher rates and sell those at lower prices in domestic market. BPC's loss in FY 2009-10 was only Tk 20.49 billion, said the official. The government raised petroleum prices thrice this year - in May, September and November -- to reduce loss of the BPC. Through the last three consecutive hikes, the government raised the prices of diesel, kerosene, petrol and octane by Tk 10 per litre. BPDB officials said funding support to state-owned BPDB will be kept limited to Tk 50 billion following the latest hike in tariff for bulk consumers last week, a senior BPDB official said. Bangladesh Energy Regulatory Commission (BERC) announced Thursday the raising of electricity tariff for bulk consumers by 33.57 per cent on an average, effective in two phases from December 1, 2011, to reduce losses of the BPDB. The BPDB earlier stated that it would require Tk 179 billion in FY 2011-12, if the bulk tariff of electricity was not raised. Bulk electricity supply cost was only Tk 2.62 per unit during FY 2009-10, said a BPDB official. But due to installation of dozens of high-cost diesel and furnace-oil fired power plants the supply costs will rise by 85 per cent to Tk 4.86 per unit by FY 2011-12 compared to that of 2009-10, said the official. BERC earlier raised electricity tariff for bulk consumers twice this year - in February and August. The energy regulator had raised bulk tariff by 11 per cent from February 1, 2011. Bulk power tariff was raised further by 6.66 per cent from August 1, 2011. Officials said BPDB has been purchasing electricity at Tk 13 to Tk 14 per unit from the diesel-fired rental and quick rental power plants and at around Tk 7.0 per unit from furnace oil-fired power plants. On the other hand, the amount of subsidy for agriculture sector might cross the allocation of around Tk 45 billion. Moreover the government will also require spending subsidy against export and food considerably higher than its budgetary allocations of Tk 22 billion and Tk 16.77 billion respectively.