The government has raised the power tariff by Tk 0.28-Tk 1.35 per unit while it witnessed big jump on bulk power tariff adjustment with maximum Tk 1.88 per kilowatt hour to minimise loss, officials confirm.
“We make upward adjustment of the electricity and natural gas from February, 2024 and will adjust petroleum fuel prices next month to minimise the losses incurred from import of fuels and dollar rate fluctuation,” state Minister for Power and Energy Nasrul Hamid said at a press conference today.
According to official data, the production cost of per unit electricity has increased Tk 12.13 that increased the subsidy burden to Tk 43,000 crore. The production cost was only Tk 8.54 a unit last fiscal year, the official data showed.
“We have considered last three months data to adjust the power tariff,” State Minister for Power and Energy Nasrul Hamid said.
He added the automated fuel prices will also be introduced the first week in March, 2024.
The government has already raised the natural gas tariff too.
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.”
