The government is planning to double the price of electricity in six phases, once every six months, by 2013.
Power Development Board general manager Abduhu Ruhulullah told New Age that the PDB had been planning to raise the bulk rate of electricity to Tk 4.68 from Tk 2.12 for each unit in six phases by 2013 to achieve the break-even.
The plan envisages raising the rate at which PDB would sell electricity to the distribution companies which in turn would increase the price the consumers have to pay.
The phased price hike reflects the policy, the government set out in the annual budget it adopted in June.
The government’s objective is to bridge the gap between the cost of production by state owned PDB and the price at which it sells electricity.
The World Bank has been putting pressure on successive governments to raise the power tariff to do away with the need to subsidise the PDB.
On November 4, the PDB sought the permission of the Bangladesh Energy Regulatory Commission for raising electricity price in the first phase.
BERC expects to finalise the recommendation relating to the first increase by early January, and place it for a public hearing before taking the final decision.
Though PDB is by far the country’s biggest power producer, it also buys electricity.
Taking into consideration both its own production cost and the price at which it buys electricity from the private sector, to break even PDB would need to sell each unit to the distribution companies at an average rate of Tk 2.72.
But PDB sells electricity to the distribution companies at an average price of Tk 2.12 a unit.
This results in a loss of about Tk 1,000 crore, requiring the government to subsidise it from the public exchequer.
According to senior PDB officials, unless the price was increased the overall gap would grow three fold to Tk 3,000 crore by the end of the next year when the more expensive oil and diesel fired power plants would come into production. In the first phase, PDB wants to raise the price at which it sells electricity to distribution companies by 12 per cent.
It would require the distribution companies to raise the price for the consumers by 9 to 10 per cent.
PDB also sought permission to reduce the low rate power tariff slab for the poor from 100 units to 50 units.
If allowed, the poor would get less of electricity at concessional rate.
A PDB official, speaking on condition of anonymity told New Age that if allowed, PDB would be able to start selling electricity to the distribution companies at Tk 2.65 per unit, up from Tk2.10, early next year.
In five subsequent phases, PDB wants to increase the price to Tk 4.68 by 2013.
The distribution companies would have to adjust the retail prices for the consumers accordingly, the PDB official said.
As a result of the decision it took to buy electricity from private rental power plant owners soon after coming to power, the Awami League led government has been under pressure to increase the price of electricity.
The government awarded contracts to private companies to install four diesel fired power plants to produce 350 MW of electricity and 11 furnace oil fired power plants to generate another 1,055 MW.
The average production cost would be Tk 14 per unit for the diesel fired power plants and Tk eight for the furnace fired power units.
The increasing electricity costs left the government with no option but to go for raising the price of electricity, said university professor and economist Anu Mohammad.
He, however, criticised the government’s policy for solving the country’s power criis.
The power sector, he said, must be under government ownership to provide electricity to the consumers at cheaper rates.
He said that by following the prescriptions of the World Bank and the Asian development Bank, successive governments in Bangladesh allowed the private sector an increasing role in electricity generation resulting in increased production cost.
Frequent increases in electricity price, said Anu Mohammad, would raise the cost of living, create instability in the market and at the same time reduce people’s access to electricity.
Ijaz Hossain, who teaches in BUET, told New Age that that the government had no choice but to depend on the private sector for furnace oil and diesel fired power generation as a stop gap arrangement.
This arrangement should not continue for more than three years, otherwise, he said, electricity would be unaffordable for the government as well as the consumers.
Yusuf Hossain, the chairman of BERC, told New Age that the regulatory commission was working on the proposal sent by PDB.
But he would not share what could be the increased price of electricity for the consumers.
He said that for taking a decision the commission was considering the affordability of the consumer, efficiency of electricity generation, ransmission and distribution, real production cost and some other factors.
He said that the opinions of stake holders would be sought at a public hearing.
The government increased the price of electricity for the distribution companies thrice over the last seven years.
It increased the retail price for the consumers in 2008 and again in March, 2010.
