Tuesday, October 8, 2024
HomeEconomyIMF projects Tk 380bn subsidy in power sector

IMF projects Tk 380bn subsidy in power sector

The International Monetary Fund (IMF) projected that Tk 380.31 billion subsidy should be needed for Bangladesh’s power sector in the upcoming fiscal year 2023-24.

The projection is around Tk 75.87 billion less than the current fiscal’s subsidy in the country’s power sector.

The global lender said that the Bangladesh Power Development Board (BPDB) incurred a loss of Tk 4.94 per kilowatt hour (unit) electricity despite the bulk power tariff having been increased twice between December 1, 2022 and February 1, 2023.

Now, the electricity generation cost stands at Tk 11.64 per unit in the ongoing fiscal, which will go down to Tk 11.12 in the upcoming fiscal year 2023-24.

The electricity generation cost increased by Tk 5 a unit in four years, according to the IMF data.         

The subsidy in electricity is likely to decrease in the FY 2023-24, amounting to Tk 380.31 billion, thanks to the decline in the international market’s energy tariffs, the IMF projection said.

Around 60 power plants out of 150 suffered a loss due to a shortfall of natural gas or liquid fuel supply, showed the state-owned Power Grid Company of Bangladesh (PGCB) data.

According to the Power Division data, the country’s derated electricity generation capacity is 22,566 megawatt. On April 19, 2023, the actual generation was 15,648MW against the real demand of 16,000 MW.

The IMF said that the supply of natural gas to the power plants was not sufficient. So, the electricity generation from gas-fired plants came down to 6200MW on average against the capacity of 11,522MW.

“If there is an overcapacity of 1000 MW gas or liquid fuel-based power plants, BPDB’s fixed expenditure shall rise by $120 million-144 million per year. If there is an excess capacity of a 1000 MW coal-fired power plant, BPDB’s fixed costs shall rise by $240 million-300 million, which will push additional subsidies,” it said.

The country’s mega coal-fired power plant Pyra is planning to close production next month due to a shortage of coal and outstanding coal and electricity bills.

The IMF also raised questions about the capacity payment over the variable of gas and liquid fuel-based power plants and coal-fired plants.

It said that the electricity from the gas and liquid fuel-based power plant was $10-$12 compared to the capacity payment of $20-$25 for a coal-fired power plant. According to the IMF document, the Ministry of Finance does not take into account the Power Sector Development Fund (PSDF) worth Tk 12,815 million in the current fiscal year and Tk 13,844 million in the fiscal year 2023-24 and the advance income tax (AIT) of 6 percent on bulk sales.

The AIT is worth Tk 25,540 million in the current fiscal and another Tk 31,166 million to release subsidy to BPDB.

“Considering the current scenario, BPDB has recently been unable to fully manage its financial obligations as per the power purchase agreement,” IMF observation said.

State Minister for Power and Energy Nasrul Hamid on Monday said the government would not pull out subsidies from the power and energy sector in the upcoming fiscal year (FY 2023-24).

“There will be a huge impact if we suddenly withdraw subsidies during the election year,” he said.

Coal prices rose to $450 from $60 (per tonne), gas prices rose to $37 from $10 (per million cubic feet), and oil prices exceeded $160 a barrel during the Russia-Ukraine war, he said. “This shock has created a serious balance of payment gap,” he said.

The state minister said the pressure was gradually coming down.

Md Mozammel Hossain, vice-president of Bangladesh Independent Power Producers’ Association (BIPPA), said the Bangladesh Power Development Board owed Tk 18,000 crore till March this year to private power plants.

BIPPA president Faisal Khan said, “We are in pressure and in trouble due to the fund crisis. So, realising the outstanding payment of Tk 180 billion may save the private power sector.” 

He said, “I expect the budget will reflect the realities of the energy and power sector.”

[source: Daily Sun]

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