Slashing of subsidy spells doom

Under pressure from the International Monetary Fund (IMF), the government has apparently approved a proposed plan by the finance division (under the ministry of finance) that will oversee phasing out of subsidies on power. While it may make sense from the Ministry of Finance's point of view, but will certainly have dire consequences for people's lives and industrial (and agricultural) production. Instead of treating the cancerous elements that are eating away at energy security of the country, policymakers are merely following prescription of donors. This depicts total capitulation at policy level to the import lobby that has brought nothing but pain to the millions of citizens who are somehow eking out a living. Inflation will continue to rise and their collective lives will become more miserable in the next three years - if this plan of action is implemented.
According to IMF projections, current subsidy to Bangladesh Power Development Board (BPDB) is Tk57 billion for Financial Year (FY) 2023-24. Unfortunately for BPDB, this subsidy is sadly inadequate to cover its costs because the public power utility company is hamstrung by the exorbitant sums it must pay to privately-owned and operated power producers (IPPs), to buy power that it must sell to consumers at subsidised rates. The gap between what BPDB paid for electricity purchased and what it got for selling that high-cost power at lower prices is what constitutes the loss of billions of Taka by BPDB. It is not simply a question of paying high prices for electricity produced, but the billions of Taka dished out each year in "capacity payment" - a net loss to the national exchequer, but one which successive governments have refused to annul.
So, instead of going out for all-out explorations of own resources, i.e. natural gas reserves (on-shore and off-shore) and natural deposits of high-quality coal, the situation was created over a decade whereby, existing natural gas production continued to dwindle and share of imported fuel increased. Today, Banladesh is in an unenviable position where more than half the fuel it needs to produce electricity comes from foreign countries / markets. Today, Bangladesh is at the mercy of foreign interests. The crisis that BPDB faces is not at all surprising. This was done deliberately to make Bangladesh weak and subservient. Given the statements coming from the government, it appears that peoples' woes are not a matter of any concern to policymakers. People are suffering silently but there is a limit to the forbearance.
It is not merely a question of paying more for electricity consumed at home by citizens. A report carried in this newspaper contends, "Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) will take necessary measures to decide the extent of tariff hikes and timelines to ensure that the country's power sector be subsidy-free". What is now abundantly clear to everyone is that the government policy will remain squarely big-business focused where expensive fuels will keep getting imported. Tariffs will continue to rise, regardless of the pain it causes to agriculture, industry and consumers at large.
Now that the government has run into multi-billion-Taka debt where it can no longer afford to pay power producers, it is going to issue special bonds and those banks that host accounts of these power producers and importers will purchase such bonds. The irony of the situation is not lost upon anyone, least of all bankers. The banking sector is already suffering a serious liquidity shortage, and now these financial institutions are being pressed by the authorities to snap up bonds. As per media reports, Tk80 billion in bank money has been pumped into these bonds. Unfortunately, hundreds of billions of Taka will be required to pay off IPPs and other suppliers of energy. God only knows where that money will come from. Even if the State phases out Tk57 billion subsidy it currently gives to BPDB, the rot that has set in cannot be treated by the issuance of bonds and raising retail and bulk tariff of power. People are going to start using less electricity and there will be a major fall in demand for goods. It's quite simple really. Industrial production will fall as people's capacity to buy goods will be hampered by runaway prices.
No matter what prescription is given by donors and how much the authorities try to whitewash the situation, Bangladesh is heading for an economic blackhole if these suicidal policies are implemented. There is no alternative to reversing the damage caused by unsound policies whereby the country moved away from self-reliance to a mostly import-driven national energy policy. There is still time to get out of this get-rich-quick mindset before the whole house of cards comes crashing down on everyone's head.

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