Impact of latest power tariff hike

The Bangladesh Energy Regulatory Commission (BERC) last Thursday approved, on an average, a 33.57 per cent hike in power tariff for the bulk consumers -- the power distribution companies, including the Dhaka Power Distribution Company (DPDC) and the Dhaka Electric Supply Company (DESCO). The tariff-hike will be implemented in two phases, from December 01 and February 01 next. The bulk power tariff was increased twice this year and the distribution companies, as usual, passed the rate-hike on to the retail consumers, adding their operational costs and a certain percentage of profit. Since the tariff hike this time is bigger than anytime in the past the average per unit tariff hike at the retail consumers' level will also be larger. The BERC, which has trimmed the Power Development Boards' original proposal to increase the bulk power tariff by 15 per cent every three months, from this month until July 2012, and 14 per cent in January 2013, as usual, has cited the high subsidy that the government has to provide because of the gross mismatch between the cost of procurement and selling rates of power as the one and only reason for the latest bulk tariff hike. There is no denying that even without the controversial rental power plants, the government always had to provide subsidy to the power sector. The entry of a large number of liquid fuel-guzzling quick rental power plants to the power sector has only exacerbated the problem for the government as far as subsidy is concerned. But no matter how the government tries to justify the latest hike power tariff it would surely hurt the subscribers at all levels. Hard-pressed by a double-digit inflation for quite sometimes, the hike will be yet another addition to their numerous woes. Besides, with the cost of doing business going up by the increased power tariff, the country's exports are likely to lose their competitiveness, to a certain degree. And it could be anybody's guess that power tariff hike would only push the inflation up further. None would contest the fact that the country desperately needs to generate more power to meet an ever-increasing demand for the same from domestic, commercial and industrial consumers. A perennial power shortage has been taking a heavy toll on the economy. The incumbent government in line with its electoral promise has been trying seriously to woo investment, local and foreign, in the power sector, to help generate more electricity. But, unfortunately, it could not make much headway in its bid to set up large power plants and as a quick-fix solution to the problem the power ministry has gone for rental power plants that are being installed by the private sector people. But the rental power plants, while imposing a heavy subsidy burden on the government for their built-in demand for greater volume of diesel and furnace oil, have triggered widespread controversy. Some experts have even questioned the wisdom of the government in relation to its option for such an expensive but short-lived solution to the power crisis. There is, of course, some truth in their observation for the rental power plants have created some degree of fiscal and balance of payments pressure on the economy. Even the government would not deny the fact that the rental power plants have been at the root of its heavy borrowing from the banking system. Unfortunately, like its predecessors, the incumbent government has done nothing to reduce power pilferage in the name of 'system loss', but though a certain degree of reduction in power pilferage could be of great help for both the power subscribers and the government.