Power tariff to increase again

The Bangladesh Power Development Board (BPDB) cannot pay the bill for lack of funds money. They also have gas bills due. In such a situation, the energy ministry has increased the price of gas on 18 January, increasing PDB’s spending by over Tk 90 billion. Due to this financial crunch the authorities are planning to increase power tariff once again.

Four officials of the power division and PDB said PDB will not be able to pay the bills of gas and energy if they cannot come out of financial crisis. They would not be able to pay the bills of power plants. This may hamper power production in the next summer resulting in increased load shedding. That is why PDB does not see any alternative to increasing the power tariff. 

State minister for power, energy and mineral resources ministry Nasrul Hamid told Prothom Alo on Sunday that the government wants to phase out oil-fired power plants and shut down all diesel-fired power plants. For that, the supply of gas has to be increased in gas-fired power plants and industries. In line with the increased gas price, the price of power might need to be adjusted.

Earlier in November, bulk power tariff was increased around 20 per cent (effective from December). On 12 January, the price of per unit power was increased by 5 per cent at the retail level. In total, power prices were increased 10 times at bulk level and 11 times at retail level in the last 14 years.

Power division sources said the prices might be increased by 10 to 15 per cent at the bulk level and 5 per cent at retail level this time. This rate has not been finalised yet and the government high-ups would take the ultimate decision on the increase. 

The government had to enforce load shedding by making an announcement from July last year due to fuel crisis. The government stopped purchasing Liquefied Natural Gas (LNG) from spot market due to increase of price in global market. This has not resumed yet. The government on 18 January increased the gas price by record 82 per cent referring to increasing LNG export. The gas price hike was the highest, 179 per cent, in the power sector.   

PDB buys power as per agreement from all power plants in the country. They later sell power to six distribution agencies at bulk price. PDB is now selling power at Tk 6.2 per unit. PDB maintains that they have to spend over Tk 9 per unit.

PDB source said four units power can be produced by each unit gas. Per unit gas price has increased by Tk 9.  That means, production cost of power from gas-run power plants would increase by over Tk 2. Half of the power produced in the country comes  from gas-run power plants. So the price of per unit power would increase by Tk 1 on average.

PDB buys gas from six distribution organisations under Petrobangla. Power plants get 1 billion cubic feet gas every day on average. In existing price of Tk 5.4, the PDB’s yearly gas bill stands at Tk 52 billion. The new price of Tk 14 each cubic feet from the next month would take the yearly bill to over Tk 144 billion.

This shows that the expenditure of PDB would increase by Tk 92 billion due to gas price hike. The government is mulling over supplying up to 1.3 billion cubic feet gas in power sector. If so, PDB’s expenditure would rise further.

PDB owes Tk 270 billion to power plants up to October. Of the amount, due to the private power plants is Tk 210 billion. The amount of bills of last several months is yet to be counted.

Sources said oil-fired private power plants are not being operated due to outstanding bills. Although the power plants are not being run, the government is to pay the capacity charge as per agreement. PDB also owes bills to Petrobangla. Sources said PDB is not paying gas bill after last May and the due gas bill has reached over Tk 30 billion.

A PDB official on condition of anonymity told Prothom Alo that finance ministry has released subsidy worth slightly over Tk 130 billion from November to June. The PDB got the amount as subsidy of 2021-22 fiscal year. Earlier they got Tk 100 billion for the same FY.  But PDB is yet to get any subsidy for 2022-23. Although PDB sent letters demanding subsidy, the finance ministry is delaying the process regularly.

Officials said the PDB’s deficit might reach Tk 400 billion after the current fiscal year even if they avail coal, fuel oil and other energy even at the existing cost. The deficit might reach Tk 500 billion due to the latest gas price hike while the government’s subsidy in the power sector is Tk 170 billion.

Power sector experts say that 40 per cent more capacity than the demand has been created by constructing power plants one after another, which should be a maximum of 20 percent according to international standards. Due to excess power plants, the government has to pay thousands of millions of taka to power plants as capacity charge. It is wrong planning in the power sector that increases the production cost.

 According to estimation provided to the parliamentary committee by the power division, the power plants had to be paid capacity charge of Tk 189.77 billion in 2020-21. Sources said the amount of capacity charge in 2021-22 increased to 197 billion. While the power plants are being paid rent despite lying idle, people are facing load shedding in this winter season.  

Consumer Association of Bangladesh (CAB) senior vice president M Shamsul Alam told Prothom Alo that the cost is increasing due to unbridled corruption and mismanagement in gas and power sectors and the consumers are the ones who bear the brunt.

He said the hike of power price again would rub salt to the wounds of the common people who have already been grappling with inflation.  Shamsul Alam said the nothing can be more unjust as the government is withdrawing subsidies from power and energy sectors and increasing the prices.