The looming power tariff hike will be ill-advised

Another hike in power tariff is in the offing. The power distribution companies have already submitted their proposals to the Bangladesh Energy Regulatory Commission (BERC). The BERC has conducted public hearings on these proposals. Even if the proposed increase is put into effect, it would be less than the cost of procurement and the government has to continue to provide a substantial amount of subsidy. If the government could de-commission the expensive liquid fuel-based rental power plants on schedule and implement large power plants in time, another tariff hike could have been avoided. But the management is unable to conduct events, as stipulated.
The rental power plants have been the centre of controversy from the beginning. Allegations about theft of fuel and fake billing have been rampant. The anti-graft watchdog has not come out in public about such allegations. Private sector sponsors of rental power plants have vested interest in maintaining and operating their plants because these plants have been fetching them handsome returns. Their purpose, apparently, is to delay implementation of large cost-efficient power plants.
The Power Development Board (PDB) is facing problems because it has to incur a loss of over Tk 6.0 billion per month. This amount goes up during irrigation season. The government is not taking any responsibility for losses caused by rental and quick rental power stations. This burden is passed on to the PDB. The government is claiming that it is giving subsidy to the power sector but in reality it is giving loan to the PDB which has no capacity to bear the loss. The PDB is urging the government to treat the amount of loss as subsidy rather than as loan. But the latter is not giving any decision in this regard.
The government is under pressure from rental power plants to raise prices of electricity. The rate hike will inflate the monthly power bill of consumers and will also fuel inflation. It appears that with the liquid fuel-fired rental power plants dominating the generation scenario, the power subscribers will always remain vulnerable to intermittent power tariff hikes. If large power projects could be implemented, the rate of hike would have been lower and would remain within a tolerable limit of the power consumers. Since 2009, the BERC increased retail electricity tariff six times, the latest in September 2012.
The government has been trying to implement a few large power projects in the public sector but progress in this respect is slow. This is taking a huge toll on the power subscribers. The latest situation is that rental power plants will continue for a long time. As large power plants are not coming on stream, the government has to depend on quick rental power plants. A committee in the Ministry of Power has recommended purchase of power from rental plants up to 2020. This means that the misery of power consumers will continue.
A technical committee of the BERC has recommended a 6.66 per cent hike for the PDB customers and 7.51 per cent rise for the West Zone Power Distribution Company (WZPDC) customers. But a number of consumer rights groups, business chambers and left-leaning political parties rejected the proposal outright during a public hearing at the BERC office in the capital. Adverse reaction also came from economists and businessmen. The final decision on the power price hike may come later this month. The government has already given a nod to raise the prices.
During the last several months, all classes of people suffered economically. Power price increase will be an added constraint. Agriculture and industry will be adversely affected. There was no increase in the price of fuel during last one year and half. Therefore, there is no justification to raise the price of electricity. During the Boro season, agriculture will be hit hard by power price hike.
Cost of production of power has increased due to the wrong policy of the government and corruption. And this burden is passed on to the people. The Vice-President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has said that increase in power price will have negative impact on industry. Businessmen want to know when the quick rentals will be phased out.
A former chairman of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said, export-oriented industries suffered heavy losses last year. In the meantime, wages of workers have been increased in accordance with an agreement with the government. Increase in power tariff will not be justified at this stage. Businessmen want some more time before price increase of power. This appears to be a sensible approach.
The PDB has proposed to increase power rate by 15 per cent for all sections of consumers - residential and non-residential consumers like agriculture, industry and business. The WZPDC has proposed about 9.0 per cent increase. The Dhaka Power Distribution Company has asked for 23.50 per cent increase. The  proposal of the Dhaka Electric Supply Company Limited (DESCO) is 15.90 per cent increase. These proposals are now under scrutiny.
The PDB's proposal to hike tariff for irrigation pumps by nearly 60 per cent has come under heavy criticism. The move would raise the cost of irrigation and thus endanger food security. A consumer rights group said that the Awami League-led government had promised to bring down power tariff in 2014. So the target should be to lower tariff and not the other way round. The BERC should assess the impact of power tariff hike on the general people, who are already suffering due to high cost of living. The hike would hurt the business and the economy that bore the brunt of recent political unrest.
Many feel that the people, who suffered a lot in political turmoil, deserve a respite before another price hike of power. The government is not a commercial establishment for making financial gains only. It will have to look at the welfare of the people. It has to find ways for producing power at a lower cost. It failed to do so during the last five years.
The writer is an economist and columnist.         [email protected]