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Bid for power price hike draws flak

FE REPORT | Thursday, 19 May 2022


Government agency's bid for a latest hike in bulk-power tariffs is hailed with gales of protest by Bangladesh's apex trade body and rights groups, largely because of the bad timing.

Pointing at the current crunch time at home and abroad, commodity price rises in particular, they demanded Wednesday that the current rates be kept unchanged.

"It will be suicidal for the government if the bulk tariffs are raised now," senior vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Mostofa Azad Chowdhury Babu said at a public hearing on the proposed raise.

Bangladesh Energy Regulatory Commission (BERC) arranged the daylong hearing on bulk-power-tariff-hike proposal at the BIAM auditorium in Dhaka.

Consumers Association of Bangladesh (CAB) demanded import of all sorts of petroleum products by the state-run Bangladesh Petroleum Corporation (BPC) discontinuing oil-import permission to private sector in order to cut production cost.

CAB energy adviser Prof M Shamsul Alam also demanded running state-run combined-cycle power plants with around 67-percent plant factor instead of current 53- percent factor to reduce electricity-generation cost.

The Bangladesh Power Development Board (BPDB) in its proposal sought to hike bulk tariffs by around 66 per cent to Tk 8.58 per unit (1-kilowatt hour) from Tk 5.17 per unit subject to unavailability of state subsidy.

The BERC technical evaluation committee suggested the hike by 57.83 per cent without any provision of government subsidy.

Speaking at the public hearing the FBCCI leader argued that the tariff-hike proposal, as placed by the BPDD, was "faulty as it did not maintain the BERC rules properly".

"Natural gas supply to private captive power plants was maintained limiting or ceasing gas supply to gas-guzzling commercially run power plants, which has increased overall electricity-generation costs," he said while presenting the FBCCI stance over the tariff-hike move.

Imposition of import duties and taxes on furnace oil since June 2020 and 5.0-percent value-added tax (VAT) on coal also added up to overall electricity-generation costs, Mr Azad added.

He listed several issues like excess electricity-generation capacity, oil-fired power plants, delay in commissioning coal-fired power plants, wrong planning over liquefied natural gas (LNG) supply chain as bottlenecks in the power sector.

The CAB leader demanded proper utilization of power- development fund (PDF) and streamlining investment from the fund in BPDB's gas-based and renewable energy projects.

Mr Alam also criticised the investment from the PDF in a 1320-megawatt (MW) coal-fired power plant.

Leaders of other business bodies and energy experts also took part in the hearing session.

"The BERC will decide on the rate of bulk-tariff hike, whatever deemed suitable," said BERC chairman Abdul Jalil.

The power board in its proposal to the BERC argues that it will have a deficit of around Tk 302.51 billion in 2022 if the bulk- electricity tariff is not hiked.

It says its electricity-purchase cost of around 88.99 billion units of electricity would soar to around Tk 741.89 billion and sale price would come to around Tk 439.37 billion.

The vital utility agency claims that the imposition of import duties and tax on furnace oil since June 2020 increased tax-related costs for electricity generation by around 34 per cent.

"Imposition of 5.0-per cent VAT on coal and soaring prices of coal on the international market have pushed up electricity-generation cost in coal-fired power plants," the BPDB states in its proposal.

Per-unit energy cost to generate electricity soared by 48.35 per cent to Tk 3.16 in fiscal year (FY) 2020-2021 from Tk 2.13 a unit of FY'20, the country's lone buyer of electricity from power producers - BPDB - argues.

Electricity-generation cost per unit might soar further to around Tk 4.48 per unit in FY '22 with soaring oil, coal and liquefied natural gas (LNG) prices on the international market, it fears.

Country's achieving cent-percent electrification increased electricity-generation cost by Tk 0.05 per unit as the number of low-cost electricity consumers soared as a consequence, the BPDB argues to back up its bid.

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