How rational is the projected power tariff hike?
Sunday, 16 May 2010
Shahiduzzaman Khan
THE government is planning to increase the prices of electricity to offset possible losses for purchasing 'high-cost electricity' from unsolicited fuel oil-based rental power plants. A proposal for increasing the power prices is expected to be sent to the Bangladesh Energy Regulatory Commission (BERC) within one or two months. The BERC, after hearing the public's opinion, would verify the grounds for various proposals and fix the prices.
While announcing the plan late last week, Prime Minister's energy adviser Dr. Taqfiq-e-Elahi Chowdhury claimed that the government had stuck rigidly to all the rules and regulations in signing contracts with private companies for diesel- and furnace oil-based rental power plants without floating any tenders. At present, according to reports, gas-based power plants generate 88 per cent of the nation's electricity. But such generation has now decreased due to shortage of gas and there was no other option left for quick solution of the power crisis that the country is reeling under, he added.
The country currently faces a shortage of around 1,500-2,000MW during the evening peak hours, leading to the frequent and protracted outages that cause the public to suffer tremendously. The Power Development Board (PDB) generates only around 3,500-4,000MW of electricity against the demand for 5,500-6,000MW. There would be no immediate respite from load shedding as 2000MW is needed for irrigation. The Cabinet had recently approved the Power Division's proposal for purchasing electricity from the rental power plants on an emergency basis as it was time-consuming to go through the open tender process. There is a special provision in the Public Procurement Act 2006 that allows purchase without any open tender in times of emergency or any disastrous situation.
The commission hiked electricity tariff by up to 7.0 per cent in March this year and a new hike in a space of a few months is feared to fuel public anger. The Power Division plans to raise the tariffs by 8.0 to 10 percent. The PDB said the average bulk power supply cost might double to over Tk 5.0 per unit (1.0 kilowatt-hour) by 2013 from the present Tk 2.80 per unit with the commissioning of new oil-fired power plants. The Board incurs Tk0.35 loss for every unit of power it sells to consumer, with the government subsidising the entire financial burden. The PDB's average supply cost would soar to over Tk 4.0 per unit by 2010, Tk 4.92 by 2011-12 and Tk 5.0 by 2013 with the start of electricity generation from the high cost fuel-run plants.
Early this year, the BREC had raised the power tariff on the pretext that the systems loss had come down by 13 per cent. If that is the case, there is every reason to contend that the authorities should go for reducing the tariff, instead of hiking it. Indeed the systems loss had gone up during most of the previous governments due to unabated corruption and mismanagement in power sector. All successive governments failed to rid power distribution agencies of massive ills. There have also been some improvements in systems loss now, but not to the extent of 13 per cent, as claimed by the authorities. Media reports say electricity pilferage is going on unabated and unauthorised power corrections are still being reported from various corners of the country.
When a public hearing on power tariff like was held late last year, most of the participants were opposed to the proposed hike. They wanted drastic reforms in the sector first, before considering any proposal for giving approval to a hike for power tariff. The BERC also directed then the distributing agencies to bring down the systems loss to a tolerable level so that the government does not suffer any hefty loss in power sector.
Electricity is a fundamental right of the citizens. It is a critical input for development of any nation. At times, power tariff-hike may be necessary to ensure stable and sustainable supply. And the government can also choose to do so, as and when necessary, provided it is for public welfare. However, the move for effecting a fresh hike to power tariff has now come at a time when the entire power sector remains chronically inefficient due to years of neglect. Without improving the situation in power sector it will not be a rational choice to force the citizens to pay for a service that they seldom get.
In a recent report, a multilateral capital donor agency has mentioned that the country suffers a loss of $1.0 billion in annual power output, which is 2.0 per cent of the GDP, due to inefficiency in the power sector. Now there are 1000-MW overpriced and under-performing power plants in the country's public sector. The average production cost per unit electricity is Tk 2.37, while its selling rate is between Tk 2.05 and Tk 2.17.
Even if this estimate is correct, the general people in this country are bearing the brunt of the systems loss in the power sector. Why should they pay such a penalty? Widespread corruption and inefficiency have gripped the whole sector and the country, thus, suffers a loss of $1.0 billion in annual power output. It is a general trend that such losses are recouped by raising electricity tariff. But that adversely affects businesses, irrigation operations and the living of the common people.
Past experiences suggest that when power tariff is raised, prices of essential consumer goods tend to make another jump. These are all inter-related matters. Consequent upon any power tariff hike, the prices of foodstuffs tend to go up again in local markets, because the prices of farm inputs also go up. The general consumers and the small industries will continue to suffer from higher tariff, notwithstanding load shedding and low voltage. The concerned authorities do, first of all, need to ensure adequate electricity generation to satisfy the consumers. Before going for any new tariff hike, it would be wiser on their part to take the views of consumers, stakeholders and power agencies into consideration.
szkhan@dhaka.net
THE government is planning to increase the prices of electricity to offset possible losses for purchasing 'high-cost electricity' from unsolicited fuel oil-based rental power plants. A proposal for increasing the power prices is expected to be sent to the Bangladesh Energy Regulatory Commission (BERC) within one or two months. The BERC, after hearing the public's opinion, would verify the grounds for various proposals and fix the prices.
While announcing the plan late last week, Prime Minister's energy adviser Dr. Taqfiq-e-Elahi Chowdhury claimed that the government had stuck rigidly to all the rules and regulations in signing contracts with private companies for diesel- and furnace oil-based rental power plants without floating any tenders. At present, according to reports, gas-based power plants generate 88 per cent of the nation's electricity. But such generation has now decreased due to shortage of gas and there was no other option left for quick solution of the power crisis that the country is reeling under, he added.
The country currently faces a shortage of around 1,500-2,000MW during the evening peak hours, leading to the frequent and protracted outages that cause the public to suffer tremendously. The Power Development Board (PDB) generates only around 3,500-4,000MW of electricity against the demand for 5,500-6,000MW. There would be no immediate respite from load shedding as 2000MW is needed for irrigation. The Cabinet had recently approved the Power Division's proposal for purchasing electricity from the rental power plants on an emergency basis as it was time-consuming to go through the open tender process. There is a special provision in the Public Procurement Act 2006 that allows purchase without any open tender in times of emergency or any disastrous situation.
The commission hiked electricity tariff by up to 7.0 per cent in March this year and a new hike in a space of a few months is feared to fuel public anger. The Power Division plans to raise the tariffs by 8.0 to 10 percent. The PDB said the average bulk power supply cost might double to over Tk 5.0 per unit (1.0 kilowatt-hour) by 2013 from the present Tk 2.80 per unit with the commissioning of new oil-fired power plants. The Board incurs Tk0.35 loss for every unit of power it sells to consumer, with the government subsidising the entire financial burden. The PDB's average supply cost would soar to over Tk 4.0 per unit by 2010, Tk 4.92 by 2011-12 and Tk 5.0 by 2013 with the start of electricity generation from the high cost fuel-run plants.
Early this year, the BREC had raised the power tariff on the pretext that the systems loss had come down by 13 per cent. If that is the case, there is every reason to contend that the authorities should go for reducing the tariff, instead of hiking it. Indeed the systems loss had gone up during most of the previous governments due to unabated corruption and mismanagement in power sector. All successive governments failed to rid power distribution agencies of massive ills. There have also been some improvements in systems loss now, but not to the extent of 13 per cent, as claimed by the authorities. Media reports say electricity pilferage is going on unabated and unauthorised power corrections are still being reported from various corners of the country.
When a public hearing on power tariff like was held late last year, most of the participants were opposed to the proposed hike. They wanted drastic reforms in the sector first, before considering any proposal for giving approval to a hike for power tariff. The BERC also directed then the distributing agencies to bring down the systems loss to a tolerable level so that the government does not suffer any hefty loss in power sector.
Electricity is a fundamental right of the citizens. It is a critical input for development of any nation. At times, power tariff-hike may be necessary to ensure stable and sustainable supply. And the government can also choose to do so, as and when necessary, provided it is for public welfare. However, the move for effecting a fresh hike to power tariff has now come at a time when the entire power sector remains chronically inefficient due to years of neglect. Without improving the situation in power sector it will not be a rational choice to force the citizens to pay for a service that they seldom get.
In a recent report, a multilateral capital donor agency has mentioned that the country suffers a loss of $1.0 billion in annual power output, which is 2.0 per cent of the GDP, due to inefficiency in the power sector. Now there are 1000-MW overpriced and under-performing power plants in the country's public sector. The average production cost per unit electricity is Tk 2.37, while its selling rate is between Tk 2.05 and Tk 2.17.
Even if this estimate is correct, the general people in this country are bearing the brunt of the systems loss in the power sector. Why should they pay such a penalty? Widespread corruption and inefficiency have gripped the whole sector and the country, thus, suffers a loss of $1.0 billion in annual power output. It is a general trend that such losses are recouped by raising electricity tariff. But that adversely affects businesses, irrigation operations and the living of the common people.
Past experiences suggest that when power tariff is raised, prices of essential consumer goods tend to make another jump. These are all inter-related matters. Consequent upon any power tariff hike, the prices of foodstuffs tend to go up again in local markets, because the prices of farm inputs also go up. The general consumers and the small industries will continue to suffer from higher tariff, notwithstanding load shedding and low voltage. The concerned authorities do, first of all, need to ensure adequate electricity generation to satisfy the consumers. Before going for any new tariff hike, it would be wiser on their part to take the views of consumers, stakeholders and power agencies into consideration.
szkhan@dhaka.net