Need for rational budgetary allocation for energy security

The amount of fund a government allocates in its national budget for primary energy supply reflects its emphasis on ensuring energy security sustainably. But reduction in such allocations as a proportion of the total budget, gives the impression that the policymakers are yet to set their priorities right on the issue. In the fiscal year 2024-25 budget worth Tk7.97 trillion, the energy and power sector is allocated Tk303.17 billion, which is 3.8 per cent of the total budgetary allocation. This is way below the allocation made in proportion to the total budget of the previous fiscal (FY2023-24) at 4.6 per cent. That means the next fiscal (FY25) will see a significant drop by 12.9 per cent compared to FY24's in the sector.

In fact, budgetary allocations for the power and energy sector have witnessed fluctuations over the years reaching a peak in FY 2018-19 followed by a sustained decline in the next two consecutive fiscals FY20 and FY21 by about 11 per cent and 30 per cent respectively. Worse yet, out of these budgetary allocations under the power and energy head, the share of energy is decreasing constantly since FY19. This does not speak well for the government's approach to a policy of sustainable energy security. In this connection, a local economic policy think tank, South Asian Network on Economic Modelling (SANEM), has questioned the government's policy of building the infrastructure of LNG (Liquefied Natural Gas), which is basically an import-based primary energy source. How can an imported fuel like LNG known for price volatility can be a basis for the country's energy security? True, power generation is a top priority as the finance minister in his budget speech informed of the government's plan to increase nation's power generation capacity to 40,000 MW by 2030 and 60,000 MW by 2041.

Now the question arises, what is the point of boosting the power generation capacity further when over 9,000 MW of power in excess of demand for 17,800 MW this summer is being produced currently in the country? This overcapacity has put an additional price burden on the consumers, who have already experienced power tariff hike four times in a year between January 2023 and February 20, 2024. This calls for a transparent energy governance policy. To ensure the nation's energy security on a sustainable basis, the government ought to reduce its dependence on imported fuels and, at the same time, diversify its primary energy source with an emphasis on renewable energy and exploration of domestic gas and coal reserves.

Though in a developing economy with few domestic primary energy reserves, achieving complete energy independence is a tall order, still the country cannot go on importing fuels to generate power. The government renewable energy plans include the Eighth Five Year plan, the Delta Plan 2100, the Mujib Climate Prosperity Plan 2022-41, the Power System Master Plan 2016 and Prospective Plan 2021 and finally, the Integrated Power Master Plan (IEPMP). Though these make an impressive list reflecting the government's seriousness about enhancing energy production from renewable sources, the allocation of only Tk1.0 billion for the proposed FY25 budget makes little sense. It is more so if the paltry sum of Tk119 million (less by 23.61 per cent than that of FY24), allocated for the Sustainable Renewable Energy Development Authority (SREDA) is considered. A rational approach to energy policy calls for addressing the mismatch between the government's ambitious plans and the budgetary allocations for the purpose.