Subsidy in power sector stood at Tk 9,000cr in last 3yers

The power generation capacity has been increasing over the years in the country, but demand has not risen proportionally, leading to around half of the capacity remaining underutilized.

In addition, the electricity production cost has been increasing rapidly for the last several years.

As a result, the Power Development Board (PDB) is incurring huge losses by selling electricity. The government is regularly subsidizing the PDB to meet this deficit.

However, the government’s expenditure in this sector has increased abnormally over the last three financial years from 2021-22 to 2023-24.

According to the data of PDB, the cost of power generation increased greatly in the last financial year due to the increase in the price of fuel oil and coal in the world market.

However, the expenditure started to decrease from February onwards. But overall production cost for the entire financial year was very high.

Additional capacity charges for some new power plants including Adani, and Rampal have been added to this. Due to this, the PDB faced a record loss in the financial year of 2022-23.

In this context, a record subsidy of Tk 39,535 crore was sought for the last financial year, although the sanctioned amount was less than the requirement.

The subsidy demand of the PDB for the financial year 2021-22 was Tk 29,658 crore.

That is, in the financial year 2022-23, the subsidy demand of the organization increased by Tk 9, 877 crore or 33.30 percent.

The PDB's subsidy demand till January of the current financial year was Tk 21, 903 crore.

However, demand will stand at Tk 39,406 crore at the end of the fiscal year. The subsidy is not increasing in the current financial year but may decrease by Tk 129 crore.

According to experts, energy expenditure may decrease slightly in the current financial year due to the low prices of coal and oil in the international market.

The subsidy demand of the PDB in the three fiscal years from 2021-22 to 2023-24 stands at Tk 1,8,599 crore which is more than the combined construction cost of the Padma Bridge, Metrorail Rail, Elevated Expressway and Karnaphuli Tunnel projects.

Meanwhile, the Ministry of Finance became puzzled with the high subsidy in the country’s power sector.

Therefore, the government has decided to increase the price of electricity four times a year to cope with the subsidy pressure.

Through this, the total subsidy in the power sector will be reduced in the next three years.

A total of 12 times hike during this period will bring electricity prices closer to the production cost. The government's power department conveyed this information to the International Monetary Fund (IMF) delegation during their visit to Dhaka.

The issue of adjusting the price of electricity to reduce the subsidy was discussed during the meeting of the power department held with the IMF delegation recently,

At this time, the IMF delegation wants to know how and how much the government will reduce the subsidy in the power sector in the present context.

In response, the power department said that the power prices will be readjusted four times every year.

Earlier, State Minister for Power, Energy and Mineral Resources Nasrul Hamid gave a similar hint to journalists last February, saying that electricity is now sold at a much lower price than the production cost. The prices are being adjusted to meet the shortage. The prices will be adjusted in a phase over the next three years. Through this, the subsidy in the power sector will be reduced.

As part of the move, the government increased the electricity price last February. Earlier, the electricity prices were increased three times in three months from January to March last year.

Electricity prices have increased 12 times at the wholesale level and 14 times at the retail level in the last one and half decades. Additionally, PDB sources indicated that electricity prices might be increased again this month or in June.

However, experts are blaming the wrong planning of the government for the high subsidy in the power sector.

While talking to the reporter, Consumers’ Association of Bangladesh (CAB) energy adviser Prof M Shamsul Alam said it is possible to reduce the cost of power generation through efficient management and proper planning without increasing the price to reduce the subsidy.

“It is illegal and unjust in the eyes of the law. Increasing the price of electricity periodically is tantamount to an oppression to the consumers,” he said.

Alam also said that the government does not ask the consumers to increase the price of electricity. If the price is increased through the public hearing, the people would know what the government has spent in which sector, and why the government has to give subsidies. During the public hearing, CAB has repeatedly identified areas of unnecessary expenditure but the efforts went in vain, he added.

It may be pointed out that till FY 2020-21, the amount of subsidy in the power sector was very low. The PDB's subsidy demand for 13 financial years from 2008-09 to 2020-21 was Tk 72, 992 crore.

Out of this, the amount of subsidy in the 2008-09 financial year was Tk 1,700 crore and Tk 994 crore in the 2009-10 financial year.

However, the PDB loss started increasing mainly from the financial year 2010-11. In that fiscal year, the PDB was given a subsidy of Tk 4000 crore.

In the next fiscal year (2011-12), the subsidy to the PDB stood at Tk 6,857 crore. The losses were reduced slightly as the subsidy demand in the 2012-13 financial year was reduced to Tk 5, 572 crore and in the 2013-14 financial year Tk 5, 621 crore.

In fiscal year 2014-15, the PDB's losses increased further. In that financial year, the subsidy demand of the organization was Tk 7, 871 crore.

In the 2015-16 fiscal year, the PDB's losses were halved and subsidy demand stood at Tk 4,365 crore. In the 2016-17 financial year, its losses were further reduced and the subsidy needed was Tk 3,994 crore. Till that financial year, the subsidy money was given as a loan.

The subsidy started as a direct grant from fiscal year 2017-18. In that fiscal year, the subsidy demand was Tk 5, 486 crores.

In the next fiscal year (2018-19), the subsidy required is Tk 7,500 crore and Tk 7,947 crore in 2019-20. And, the subsidy demand of the PDB for the fiscal year 2020-21 was Tk 11, 778 crore.

Courtesy: Share Bize