The government has decided to increase the price of electricity saying price is being adjusted in a bid to tackle the pressure of subsidies.
The power price will go up from March in the first phase.
State minister for power, energy and minerals Nasrul Hamid told the newspersons that the price of power may increase by 34 to 70 paisas per unit in the first phase.
The price of electricity is lower than the production cost, he argued saying the price of power is being adjusted to meet the deficit.
The power price will be adjusted in phases for the next three years.
The government raised the price of power by 5 per cent every month from January to March last year. The electricity price has remained the same since then.
Despite the price hike, the Power Development Board (PDB) incurred a loss of Tk 435.39 billion in the 2022-23 fiscal. The government had to provide a subsidy of Tk 395.34 billion.
The PDB officials are saying the wholesale price of the electricity now stands at Tk 6.70 per unit on average.
To reduce the subsidy in the power sector as per the condition imposed by the International Monetary Fund (IMF), the wholesale price of electricity must be raised to Tk 12.11. In that case, the retail price of power would be Tk 15 per unit, which now stands at Tk 8.25.
The price of power needs to be raised at once in case the subsidy is lifted. However, that would be unbearable for the common people and the industries. So the government wants to raise the price in phases.
Sources at the power division said raising the price of power was declared on Wednesday. The price could be raised at both retail and wholesale levels.
However, state minister for power Nasrul Hamid denied calling it a price hike. Speaking to the newspersons, he said, “It could be termed a price hike if the price was higher than the cost. The amount of deficit is huge at the moment. Therefore, the power price is being adjusted. Adjusting prices based on the energy cost is a worldwide practice.”
Asked why the cost is being raised when it is supposed to come down once the big coal and gas-based power plants go into production, Nasrul Hamid said, the price of a dollar was estimated at Tk 70 to Tk 80 during the construction of coal-based powered power plants. The price of a dollar has increased by Tk 40 as compared to the estimated price. As a result, the power generation cost has increased a lot as compared to the past.
Production cost increased by 29pc
The PDB purchases electricity from all the power plants as per the agreement. After that, they sell that at the wholesale price to distributing agencies.
As per the account of the PDB officials, the production cost per unit of power was Tk 8.96 in the 2021-2022 fiscal, which rose by 29 per cent to Tk 11.52 in the last fiscal.
The government raised the prices of power as the production cost increased. The price of power was raised 11 times at the wholesale level and 13 times at retail.
The people had to suffer a lot due to load-shedding in the last two summers as it’s not possible to run power plants without fuel despite having a high power generation capacity.
Meanwhile, the government has raised the price of gas used in the power sector in another phase. The Energy and Mineral Resources Division raised the gas price by 75 paisas per unit for all the government and private power plants through a notification published on Tuesday.
The new price will be in effect from February. Due to this 5 per cent raise in the price of gas per unit, the production cost will rise further.
The price of gas used at the factories' own power plants has been raised to Tk 30.75 from Tk 30.
The energy and mineral resources division claimed that despite raising the price, a subsidy of Tk 60 billion will be needed in the gas sector.
Earlier on 18 January, the price of gas was raised by 82 per cent following an executive order. The price of electricity was raised by 179 per cent that time.
The businesspersons are saying their business costs will rise further after the hike in the prices of gas and power. It will indirectly raise the prices of the products.
Speaking to Prothom Alo on condition of anonymity, a senior official of a daily essential supplying committee said the government's main priority is to reduce the price of daily essentials.
But the production cost will rise with the hike in the prices of gas and electricity.
Price hike on executive order
Earlier, the Bangladesh Energy Regulatory Commission (BREC) used to adjust the price of power regularly by organising mass hearings on the basis of the proposal from the concerned companies. It used to take a few months to complete the process. Therefore, the BERC law was amended in December 2022 to pass the jurisdiction of raising prices through executive orders to the government. So there is no scope of reviewing the proposals of raising price or taking opinions from the stakeholders.
Speaking to Prothom Alo, private research organisation the Centre for Policy Dialogue (CPD) senior research director, Khandaker Golam Moazzem said, “The proposal to raise the power price is strongly opposed. The reason behind the rise in the power price is the unused power generation capacity and the rent for that.”
He further said the price of power could be curbed if the agreement with the power plants is not renewed, signing new agreements on condition of ‘no electricity, no bill’ and bringing the old power plants under the new agreement and increasing power generation from renewable energy.