The government is likely to make upward adjustment of the electricity, natural gas and petroleum fuel prices next month to minimise the losses incurred from import of fuels and dollar rate fluctuation.
“The ministry will adjust the electricity price for those using over 400 units. But the gas price will be adjusted for the consumer category related to electricity production,” State Minister for Power and Energy Nasrul Hamid told Just Energy News.
He added the automated fuel prices will also be introduced in March, 2024.
“We are working to adjust the energy commodities prices to bring it to a comfort level for consumers,” said the minister.
The government increased the gas prices in February, 2023. Then, the government increased the natural gas prices for power generation, industries, and commercial consumers up to 179 percent.
Earlier on 12 January, the government had raised electricity prices by 5 percent to Tk7.48 per kilowatt hour at the retail level.
About the power tariff issue, a managing director of a power distribution company said the government has plans not to hike the tariff for those users below 400 units as they are considered to be lower middle income group.
“Initially, the bulk power tariff will be hiked by 5 percent. Then the retail power tariff will be increased for above 400 unit users before Ramadan,” said a top official on the condition of anonymity.
He added that the government may increase the power tariff again in the second phase after Ramadan.
Bangladesh Independent Power Producers Association (BIPPA) president Faisal Karim said they have so far received Tk 110 billion outstanding arrears after issuing bonds.
“But, the arrears stand at Tk 150 billion so far,” he said, expressing frustration.
Faisal Karim added the power producers still procure loans at Tk 120 against each dollar. “So, the income in electricity generation has declined significantly.”
He said, “I have got a profit of Tk 700 crore from Summit Power Ltd (SPL) previously, which comes down to Tk 150 crore now.”
Shafiqul Alam, Lead Energy Analyst of Institute for Energy Economics and Financial Analysis (IEEFA), given the level of revenue shortages in the power sector and the payment backlogs for which the government had to opt for bonds, there is almost no alternative to raise power tariffs.
“The increase should be gradual instead of a sudden steep rise,” he stressed.
“However, power tariffs for the poor and low-income segments of the country should not be increased because they are already burdened with different challenges including high prices of commodities,” he suggested.
The analyst feared that there is one caveat – high electricity tariffs may further affect the electricity demand growth rate in the industrial sector similar to a sluggish demand growth rate in the last 2 to 3 years/
“High electricity prices will severely impact industrial production. Unless the industry sector drives electricity demand growth, we will eventually have a significant idle capacity, leading to capacity payments.”
He said, “Two positive aspects – industries will try to frontload efforts to enhance energy efficiency and deploy rooftop solar systems. Households will also try to minimize wasteful energy use.”
A hike in gas prices will further make electricity generation costly, he pointed out.
Shafiqul Alam said, “This is similar to last year when both electricity and gas prices were raised. However, we could not ensure uninterrupted power and gas supply last year.”
“On automated fuel pricing, we need to consider that a significant amount of oil is consumed in the transport sector. Then, how will the fare of transport be adjusted?”
As the power and energy sectors continue to suffer from imported fossil fuel dependence, it is of utmost importance to minimize system cost and inefficiency, he suggested, adding, “Only tariff adjustments will not help.”
