Power subsidy increases 9 times in a decade

The country’s power generation capacity has increased by 4.5 times in last decade, but ironically, government subsidy in power rose by 9 times during this period. The subsidy is increasing every year. To reduce the rate of subsidy, a four-day public hearing on electricity price adjustment at both wholesale and retail levels started from Thursday at Bangladesh Energy Regulatory Commission (BERC), in the capital, and it will continue till December 3. After hearing everyone, BERC will declare new price of electricity.

Energy experts said that if the subsidy was reduced then the money could have been invested in other sectors. State Minister for Power, Energy and Mineral Resources, Nasrul Hamid has said ‘the government wants to avoid subsidy in power generation. For this reason, BPDB has submitted a proposal to the Bangladesh Energy Regulatory Commission (BERC). Now the commission will decide whether to go for subsidy or price hike of electricity.

Nasrul further said ‘currently some large power plants are under construction. We hope the country’s first mega project Payra 1320MW power plant will start its generation this year. Some other mega power plants will go into operation within 2022-2023. Then the power generation cost will decrease. So we have to wait around 3-4 years for affordable price.’

According to power division, currently, per unit cost of furnace oil run power is around Tk 17 whereas for diesel it’s Tk. 26. On the other hand LNG based power plant’s generation cost is TK 13, for imported coal based is TK 8.1, domestic coal is TK 6, gas is TK 2.57, hydro is TK 1 and for solar power plant’s generation cost per unit is around TK 12.

At present as much as 46.14 percent power is being generated from gas, 22.93 percent from furnace oil, 10.24 percent from diesel, and 2.84 percent from renewable sources. The remaining 5.44 percent is being imported, according to the Power Division data. Bangladesh Power Development Board (BPDB) has sent a letter to the BERC, where BPDB claimed that they would face a deficit of taka 8,561 crore due to electricity sale at a cheaper rate in 2020.

It was said in the letter, the amount of power generation was 6,079 crore 62 lakh unit in 2017-2018 fiscal year. In the last fiscal year, it was increased to 6,861 crore 63 lakh unit and it will stand around 7,587 crore 46 lakh unit. However, it will be 7,920 crore 62 lakh unit in 2020. As a result, BPDB will have to spend taka 45,208 crore 93 lakh. On the other hand the approximate income will be taka 36,648 crore 24 lakh in the year. As a result the BPDB deficit will stand around taka 8,560 crore 69 lakh.

According to BPDB, the government’s subsidy was taka 994 crore in 2009-2010 fiscal year, while it increased three times and reached at taka 4,000 crore in next fiscal year. The subsidy was taka 6,357 crore in 2011-2012, which also decreased in 2012-2013 fiscal year and the amount was taka 4,486 crore. The subsidy was increased again in next fiscal year and the amount was taka 6,100 crore. The subsidy in next fiscal years were taka 8,978 crore, 4,365 crore, 3,994 crore, 4,545 crore and in last fiscal year (2018-2019) it was taka 7,970 crore. However, in current fiscal year it would be around taka 9,000 crore. The subsidy may increase more, said power division official.

During the last nine years, no coal-fired power plant came on generation, though the Payra plant is expected to generate power at the end of the current year. To increase production in the last nine years, there was more stress on using liquid fuel. Energy expert professor Dr. Shamsul Alam said, “We have always wanted to track irrational expenditures in the power sector and have given a plan as to how production cost can be lowered.”

The last electricity price hike happened on November 23, 2017, when the Energy Regulatory Commission had raised the price of each unit by Tk0.35, marking a 5.3 percent increase.