People are already struggling due to price hike of daily essentials and there is no good news for them in the offing. Rather, the costs will soar in the coming days, said experts.

Questions have been raised on the government’s policies on power and gas by Centre for Policy Dialogue (CPD), a non-government think-tank, at different times. This time also the body has raised questions about the moves to hike prices.

Speaking to Prothom Alo, CPD research director Khondaker Golam Moazzem said the government made a mistake in estimating the demand of electricity. That’s why there is a huge gap in demand and generation capacity. As a result, consumers are being forced to pay the money that the government pays the idle power plants.

He said consumers cannot be burdened with the extra cost as they are not responsible for the situation. A certain clique has made the government dependent on importing gas. Now, the government wants to realise the money it has been spending in gas import from the consumers.

Rent of power plants to rise

Power Development Board (PDB) buys power from rental power generation plants for short term and from IPP (Independent Power Producer) for long term. The contract to buy power has to be completed even before the construction of the plants. If the PDB doesn’t buy power from the plants as per the agreement, it has to pay the companies for its capacity which is known as capacity payment or plant rent. That’s why PDB has to spend billions of taka as capacity payment if the number of idle plants increases.

PDB sources said annual rent of an idle plant with 100MW generation capacity is about Tk 900 million (90 crore). Rent of larger power plants is more. For example, PDB has been paying Tk 1.3 billion (130 crore) monthly to coal-run Payra power plant with 320MW generation capacity. Price of per unit power from the plant was Tk 8.6 in the last year. The price was Tk 6.3 in the previous year. PDB could not use the full capacity of the plant as the distribution line is yet to be completed.

CPD said the additional generation capacity is the result of mistakes in projection since the beginning. At the same time, distribution and transmission line could not be built in comparison with increasing generation capacity. The government is forced to continue running quick rental power plants as it could not built large power plants. Twelve such plants with 920MW generation capacity have been operating in the country.

Gas, coal, furnace oil and diesel are mainly used for power generation in the country. In its proposal to increase prices by 64 per cent at the bulk level, PDB said because of gas crisis, they are forced to keep gas-based power plant shut and more power is being bought from furnace-oil run plants. Importing of furnace oil has become 34 per cent costlier due to VAT and duty while the price of coal has increased in the international market. Proposal has been sent to raise the gas price as the price of LNG has already increased. That’s why PDB would have to incur a loss of Tk 325 billion (32,500 crore) this fiscal if the power price is not increased, the proposal added.

Six distribution companies buy power from PDB. They already have asked for an increase in the price at the retail level.

On 11 February, a report of the US-based Institute for Energy Economics and Financial Analysis (IEEFA) said PDB spent Tk 136 billion (13,600 crore) only as plant rents in the last year which is 25 per cent more than the previous year.

Generation capacity to increase more

Plans to build new power plants have not stopped though almost 100 per cent area of the country has come under electrification. At the end of 2024-25FY, another 19,651MW generation capacity is said to be added. By that time, only 3,990MW from older generation capacity would be decreased. By 2025, Bangladesh’s power generation capacity would be 34,345MW against the demand of 19,900MW at best, says a PDB projection.

Speaking to Prothom Alo, Mohammad Hossain, director general of Power Cell, a policy research body of the government’s power division, said though we have to pay plant rents, the allegation of having excessive generation capacity is not true. This is necessary. Different types of plants are being built as we have limited primary fuel. Oil-run plants are being operated when there is gas crisis. The main thing is, there is no load-shedding and people are getting electricity.

Currently, the generation capacity of the country is 22,066MW. Around 9,000-10,000MW power is being produced every day. As of 22 February, PDB produced 13,792MW power on 27 April 2021, so far the highest.

Everyone is making profit except PDB

Except the PDB, all other organisations involved in the business of power and gas are making profit. The government has been subsidising PDB every year alongside Petrobangla. The finance ministry has advised to increase the price of gas and electricity.

Among the distribution companies, DPDC (Dhaka Power Distribution Company) made Tk 1.08 billion (108 crore) profit in the last year, DESCO’s profit was Tk 730 million, Palli Bidyut 200 million, WZPDCL (West Zone Power Distribution Company) made 240 million, and NESCO made 180 billion. Power Grid Company of Bangladesh (PGCB), the only power transmission company in the country, made Tk 3.37 billion (337 crore) profit in the last fiscal.

Despite making profit, all the companies have applied for increasing distribution charges alongside the power price.

On the other hand, Petrobangla made over Tk 20 billion (2,000 crore) as profit in the gas sector in the last fiscal. Among the gas distribution companies, Titas profited Tk 3.46 billion (346 crore), Jalalabad Tk 2.18 billion (218 crore), Bakhrabad 1.26 billion (126 crore), Karnaphuli 3.51 billion (351 crore), and Paschimanchal Gas company Limited (PGCL) made a profit of Tk 60 million (6 crore) and Sundarban gas company Tk 59 million (59 crore). Gas Transmission Company Limited (GTCL), only gas transmission company in the country, profited Tk 2.37 billion (237 crore).

M Shamsul Alam, senior vice-president of Consumer Association Bangladesh (CAB), body to protect rights of consumers, told Prothom Alo that even the government companies are exploiting now. They want to raise price even after making profits. The companies are jointly doing this providing false information.

LNG price increasing costs of gas

Two Petrobangla officials said price of per unit gas costs Tk 20.36 due to importation at high price while the consumers pay Tk 9.37. That’s why Petrobangla proposed for a 100 per cent hike in price.

Petrobangla sent a calculation of gas distribution costs to BERC. It said local companies produce gas at a cost of Tk 1.27 per unit while the cost for foreign companies that produce gas from local gas fields is Tk 2.91. The price of per unit imported gas is Tk 50.39. Petrobangla in its letter to the BERC said it would require Tk 442.65 billion (44,265 crore) for importation of LNG this year.

According to Petrobangla, 73 per cent of total gas to be distributed this year will come from local gas fields and it would cost Tk 55.72 billion (5,572 crore). Remaining 27 per cent will be met from importation which will cost Tk 442.65 billion (44,265 crore).

Speaking about this, Petrobangla chairman Nazmul Ahsan told Prothom Alo, LNG importing is the main reason of gas price hike. We have been buying gas from spot markets at a higher price. The effect would not have been so massive if it were not so.

Without putting emphasis on gas exploration and production, LNG importation began since 2018. But the country has signed long-term agreement with only two countries for importing LNG at a fixed price. As a result, it needs to buy gas from spot markets at a higher price.

Pressure on consumers

Price hike of strategic goods like power and fuel affects production costs and price of daily essentials. But the industry sector is under bigger threat. Export-oriented apparel businesses and other sectors have already protested the price hike.

Bangladesh Textile Mills Association (BTMA) president Mohammad Ali said the government has been taking profit and tariff from gas and power companies. It would be better if the price is not increased now. Raw materials of apparel sector is completely import-based. The sector cannot growth further if gas and electricity prices are increased repeatedly.

CAB said gas price has increased by 129 per cent at the consumer level in the last one decade. A family needs to pay Tk 975 instead of Tk 400 for two burner gas stove. Now it has been proposed to raise to Tk 2,100.

On the other hand, electricity price has increased by 118 per cent at the bulk level in that time while 90 per cent in the retail level. Now proposals have been made to increase the price at the bulk level by 64 per cent and at the consumer level by 66-79 per cent. Price of diesel, the most used fuel, has increased to 80 taka from 44 taka per litre.

M Tamim, special assistant to the chief adviser to a former caretaker government, thinks the government has a lack of coordination in the gas and power sector.

He told Prothom Alo despite the gas crisis, no proper plan was made for importing LNG. The crisis will exacerbate in the future. Excessive generation capacity has been created in the power sector without ensuring fuel. Rent is being paid to a large portion of plants that remain idle in the winter. Corruption is also taking place in the sector, he added.

* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Shameem Reza

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