What is the rationale behind power tariff hike?

The government has increased the price of power at retail and bulk levels, effective from last month, creating difficulties for industries and end users. At retail level, the price has been increased by five per cent. Residential users, who consume over 100 units of power, will have to pay this inflated rate. A consumer using 200 units of power will have to pay Tk 606.50 under the new tariff, which used to be Tk 560 until January this year. At bulk level, the price will increase 11 per cent on average. The bulk price will be Tk 2.63 per kilowatt which was previously Tk2.37. The price rise at the bulk level is for the next six months, as the government will again increase the price by 6.6 per cent at bulk level on August 1 this year, taking the cost of each unit to Tk2.8 per kilowatt -- nearly 18 per cent for bulk users at the end of the year. In spite of the price increase, sufferings of the people will not decrease. Shortage of power and load shedding will continue. Bangladesh Energy Regulatory Commission (BERC) has recommended that an amount of Tk 15 billion (1,500 crores) subsidy should be given to the Bangladesh Power Development Board (BPDB). It may be pointed out that the government is buying electricity from private companies at a high cost. The consumers are now asked to pay for the increased cost. Power crisis has been there for a long time. According to government estimate, the gap between demand and supply will be 2000 megawatt in April-May. Load shedding will be at the maximum level in that period. 200 megawatt of electricity is already going to the rural areas. This amount will increase at the end of this month. Nobody knows when the power crisis will be over. It is hoped that when the new plants will come into stream at the end of this year, power situation will improve. But as these units are run by oil, cost of production will increase. Therefore, there is need to go for coal-based projects. There is plenty of reserve of superior quality coal in the country but there is no initiative for mining coal. Further delay in coal mining is not at all desirable. The government is buying time in declaring the coal policy. The use of liquid fuel and power management through quick rental system have become risky. This has increased the cost of production of power. On this pretext, the government has increased power tariff. This has resulted in increase of prices. This will increase inflation. Taka 90 to 100 billion (nine to ten thousand crore) goes to the power sector as subsidy. As a result, resources for development and social sectors will be more scarce. The high cost of production of power in the private sector is being passed on to the government and the government is giving subsidy for this purpose. This is a new phenomenon created by the government. In the summer, there will be a shortage of 2000 megawatt of electricity even if the power plants set up in the private sector without tender come on stream. The shortage will be met through load shedding. On the other hand, there is no prospect of meeting gas shortage in the next two years. In this situation, people's suffering will not be minimised. Concerned sources say that in the summer of last year, production of electricity was 4700 megawatt. At the moment, many power stations are closed for want of gas and repair and current production will not exceed 4000 megawatt. If the old power stations are repaired and the power plants without tender come on stream in time, production will increase by 1000/1500mw. In all, the maximum production is estimated at 5500 megawatt and demand will exceed 7000 megawatt. Demand will further increase if power connections is resumed fully. During the summer last year, the demand for power in Dhaka zone stood at 2800mw. Supply was at 2000mw with a shortage of 800mw. This year demand may exceed 3000mw. Further demand may come from Cricket World Cup matches. Shortage will be around 1000/1500mw which has to be met through load management. The present capacity of the BPDB is 5945mw but actual production is 3500mw. Production is less by 651mw due to gas shortage. 13 power stations are closed for repair and maintenance. Repair and maintenance are expected to be completed by the next month. If things are right, production of electricity will be 5500mw by next month. In any case, power situation will not improve before July next. That is the time of peak demand. In the current irrigation season, demand for power will be about 1800mw. It is feared that it will not be possible to provide uninterrupted supply of power during the peak irrigation season. If power is to be supplied from 11pm to 7am for irrigation purposes, the cities will remain dark. Supply for irrigation cannot be met fully if we are to meet the demand of the watchers of Cricket World Cup matches. According to BPDB, production of power will be higher by 500mw this year. Current year's production is estimated at 5500mw. But current production will be less by 800mw for the shortage of gas. Gas-based power plants in Chittagong have been shut down. These plants could produce 400mw. Industrial investment in the country is stagnating for want of power and gas. New investments are not coming up. Entrepreneurs say that it is difficult even to keep the existing factories running. The government has increased power tariff. This will put an additional burden on the people. But the people are not getting adequate power in spite of the increase in tariff. The tariff hike has also not taken care of the deficit of BPDB. The increase in power tariff appears to be without any sense of direction. The government has introduced a new system of awarding contract without tender in the power sector. This is not in accordance with the public Procurement Act. There are questions about this practice. The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com