Fuel prices, load-shedding and subsidies

Load-shedding is on full swing all over the country. Actually, this situation was created quite a while back and many regions had already been facing these power cuts. I live in the capital city Dhaka. The day the government celebrated 100 per cent of power generation with much fanfare, I could clearly see from afar the fireworks lighting up the sky in Hatirjheel because we didn’t have electricity at home then. The government even claims to have the capacity to generate 200 per cent more electricity than demand, yet rarely has a day passed by where I haven’t faced power cuts at least two or three times a day at home. Outside Dhaka, the electricity supply was much worse in many places. This was not covered by the media and neither did the government offer any explanation. But things have worsened to such an extent that the government can no longer keep up with its propensity for promises. Now it has officially declared load-shedding all across the country.

The government is pointing to the Russia-Ukraine was as the reason behind the power crisis. It is true that this war led to an increase in oil and LNG prices in the international market and a disruption of the supply chain. But was it inevitable for us to fall into this predicament? Do we have to import oil and LNG for power generation? Was there no alternative? Yes, there was. Actually this present power crisis, the growing subsidies in the sector and dependence on loans, is a result of the government’s master plan with the Rampal and Rooppur power projects, which are threats to the biodiversity of the Sundarbans, to the country, and where the individuals involved have been granted impunity.

In the master plan prepared by Japan, rather than taking any initiative to extract our own gas, the way had been cleared to take up costly projects involving the import of LNG, coal and use of nuclear power. The matter of energy sovereignty and national capacity has been totally overlooked. The impunity clause has been repeatedly extended for rental, quick rental power plants and such irregularities, corruption and lack of transparency. Such projects are extremely profitable for some local vested quarters and certain foreign companies, but are extremely threatening to the country, both financially and environmentally.

On the other hand, the master plan (2017-2041) which we put forward on behalf of the National Committee placed priority on energy sovereignty and national capacity. We proposed creating institutional capacity using both our own gas and renewable energy, gradually proceeding in three phases (2021-2031-2041) towards renewable energy. This would not require reliance on any loans, imports or dependence. It would not require destroying the Sundarbans for electricity, it would not require coal or dangerous nuclear energy. As part of the process of increasing national capacity, the country’s education could also reach new heights. The cost of electricity would gradually go down too. But vested quarters at home and abroad did not agree to this as it did not spell fat profits and huge commissioners for them.

The prevailing crisis is a small consequence of this. If things continue in this manner, even huge crises and dangers will continue to loom large. The recent hike in fuel prices is an example of this. The cost of diesel, kerosene, petrol and octane just leapt up by 42 to 52 per cent. As it is, the cost of essentials was on the rise. This is now increasing in leaps and bounds. The people were bearing the brunt of Covid and are now at a total loss. The economy has been hit hard.

The government’s lame excuse is that fuel prices have gone up in the global market. That is not true. Oil prices are falling in the global market, not rising. Secondly, it is being said that huge amounts of subsidy are being paid to import fuel, but the main source of government information, Bangladesh Economic Review 2022 (published in June 2022), says quite the opposite. According to their records, the government paid no subsidy in the import of fuel oil from 2014-15 to February 2022. In fact, in this time (till 23 May 2022), it made a profit of around Tk 481.22 billion (Tk 48,122 crore). This profit is many times higher than the losses made over the past couple of months. If the government was concerned about public interests and the economy, it would have thwarted these losses with a portion of the profits.

Thirdly, in consideration of the alarming consequences caused by a price hike, many countries tried to keep things in control by slashing tariff and duty in oil import. The government did not do that. Fourthly, it was said that we do not have to buy octane or petrol, we have surplus. So where does the global price hike fit in with this narrative?

The increase in fuel prices is not the only assault on the people. It is said that the government is giving huge subsidy in the power sector and so the price of electricity will have to be increased in order to slash the subsidy. IMF says so too. But neither the government nor IMF is interested in addressing the cause being the subsidy. After all, who is receiving this subsidy? The answer lies in these facts. Even without producing electricity, over the last 11 years (2011-12 to 2021-22), various companies have been paid Tk 900 billion (Tk 90,000 crore) in total by the government in the name of capacity charge. Of this, around Tk 600 billion has gone just to 12 companies alone.

Who is responsible for paying these billions to local and foreign companies instead of ensuring electricity for the people? It is the government that took up such planned despicable deals. The government’s people who have pocketed the commission for such deals have made fat profits and so they must take the liability.

Over the past few days the government has used the excuse of economic crisis to approach the World Bank for a loan of around Tk 90 billion (Tk 9000 crore). It has sought around Tk 90 billion in loans from ADB and around Tk 400 billion from IMF. That means chaining the country in all sorts of conditionalities for loans from the World Bank, ADB and IMF, while paying a handful of power sector businessmen much higher amounts for nothing. That is not all. The total amount of default loans that have been misappropriated by certain quarters and written off, totals over Tk 2 trillion (Tk 2 lakh crore). So where is the shortfall of money in the country? Why should the people bear the brunt of this burden? The people’s only task should have been to catch these looters who have stolen their resources.

During the Fulbari mass uprising, a farmer had declared in no uncertain terms, “Those who do what they want when in power, may call themselves the government, but they are only temporary. They come and go. The people are permanent. We are the real government.” Without the active participation of this real government, we cannot be saved from this steadily deteriorating crisis.

* Anu Muhammad is an economist and professor of economics at Jahangirnagar University and also the editor of ‘Sarbajankatha’.