Power rate hike: A Hobson's choice for government
Sunday, 16 May 2010
WHAT the Prime Minister's energy adviser told newsmen late last week at a press briefing would, perhaps, make the power subscribers happy and, at the same time, angry. Power subscribers should be happy because the adviser sounded pretty serious about increasing power generation and, if the government plan goes as scheduled, there could be some relief from the nagging power crisis at the end of the current year. However, his disclosure that the state-owned Power Development Board (PDB) would soon send proposals to the Bangladesh Energy Regulatory Commission (BERC) to effect a further hike to the power tariffs by a big margin would enrage them because only a couple of months back the Commission had increased the power rates by seven per cent.
Subscribers, obviously, want adequate supply of utilities such as power, gas and water, of course, at cheaper rates. But, at least, in the case of power the government would not be in a position to afford the current tariffs when it would start procuring power from liquid fuel oil-based private rental plants at higher prices in the latter part of the year 2010. Even after the recent hike in tariff, the supply of power remains subsidised. The subsidy component would rise up to an abnormal level if the rates were not hiked. But the questions relating to its affordability to all sections of subscribers, and the consequences of large hikes on the cost of production in domestic industries, should not be overlooked. Ultimately, the higher cost of production on account of any hike in power tariffs would be passed on to the consumers, meaning that most industrial products would become costlier. Government policymakers do need to ponder, quite seriously, whether the economy that is already under inflationary pressure should be subjected to this kind of situation.
Actually, the power rate hike is a case of Hobson's choice for the government. There could be debates whether the government's non-serious attitude in the first year of its power to the generation of more electricity has forced it now to go for unsolicited bids for setting up rental power plants or agree to higher power procurement rates offered by sponsors of the same. But the fact remains uncontestable about the pressing need for ensuring the availability of additional power to keep the wheels of the economy going. However, the issue of subsidy on power supplied to various types of consumers cannot be bypassed because of its implications on government's fiscal management ability. The government has certainly not yet done enough homework on the subsidy requirements on account of purchase of power from private power plants at higher tariffs. The PDB should come out in public with the details of the subsidy element, the present status and future requirements. While doing so, the subsidy given to fuel oils that are consumed by power plants should also be taken into account.
Notwithstanding the fact that policymakers had failed in the past to materialise their high-sounding promises on power generation, the people would be heartened by the strong optimism expressed by the energy adviser about the country having some surplus power in 2012. But, in the meanwhile, the government should make serious efforts to reduce systems loss or outright pilferage of power. Snapping of illegal connections, according to one estimate, could save at least 350 megawatt, which should be enough to meet the power need of a large area. The ministry concerned should ask the power distribution companies to embark on a crash programme to cut unauthorised connections.
Subscribers, obviously, want adequate supply of utilities such as power, gas and water, of course, at cheaper rates. But, at least, in the case of power the government would not be in a position to afford the current tariffs when it would start procuring power from liquid fuel oil-based private rental plants at higher prices in the latter part of the year 2010. Even after the recent hike in tariff, the supply of power remains subsidised. The subsidy component would rise up to an abnormal level if the rates were not hiked. But the questions relating to its affordability to all sections of subscribers, and the consequences of large hikes on the cost of production in domestic industries, should not be overlooked. Ultimately, the higher cost of production on account of any hike in power tariffs would be passed on to the consumers, meaning that most industrial products would become costlier. Government policymakers do need to ponder, quite seriously, whether the economy that is already under inflationary pressure should be subjected to this kind of situation.
Actually, the power rate hike is a case of Hobson's choice for the government. There could be debates whether the government's non-serious attitude in the first year of its power to the generation of more electricity has forced it now to go for unsolicited bids for setting up rental power plants or agree to higher power procurement rates offered by sponsors of the same. But the fact remains uncontestable about the pressing need for ensuring the availability of additional power to keep the wheels of the economy going. However, the issue of subsidy on power supplied to various types of consumers cannot be bypassed because of its implications on government's fiscal management ability. The government has certainly not yet done enough homework on the subsidy requirements on account of purchase of power from private power plants at higher tariffs. The PDB should come out in public with the details of the subsidy element, the present status and future requirements. While doing so, the subsidy given to fuel oils that are consumed by power plants should also be taken into account.
Notwithstanding the fact that policymakers had failed in the past to materialise their high-sounding promises on power generation, the people would be heartened by the strong optimism expressed by the energy adviser about the country having some surplus power in 2012. But, in the meanwhile, the government should make serious efforts to reduce systems loss or outright pilferage of power. Snapping of illegal connections, according to one estimate, could save at least 350 megawatt, which should be enough to meet the power need of a large area. The ministry concerned should ask the power distribution companies to embark on a crash programme to cut unauthorised connections.