Impacts of electricity price hike

The government’s decision to hike electricity prices did not come as a surprise. People were expecting yesterday’s announcement ever since the price was hiked by 19.92 per cent at the producers' end in December 2022.The only thing people were worrying about was by how much the price would increase.

It must be said though that while announcing the bulk electricity price hike in November last year, Nasrul Hamid, the state minister for power, energy and mineral resources, and BERC Chairman Abdul Jalil assured that the electricity price at the retail level would not increase. But the six distributors began submitting their proposals to hike the electricity price by an equal percentage in the same week. So people came to believe that the government would eventually yield to their demand as had been the case in previous occasions.

The five per cent increase, while not shocking, would still hit the common consumers hard as the raging inflation shows no signs of slowing down anytime soon.

In the recent months people have been suffering from economic hardships resulting from the painful government decisions regarding financial matters. We should perhaps not be too harsh on the government as it has been forced to take unpopular decisions to fix the deep economic problems in the last several months. Its job has been made even more difficult by the IMF whose support the country direly needs to prevent a serious fiscal crisis.

That the new electricity prices are likely to unleash a new round of inflation. As indicated earlier crushed by high energy and food prices, the new wave of inflation is going to badly hit low- to middle-income families. With living becoming unaffordable for most of us, the possibility of social unrest cannot be ruled out. The most unfortunate part of the story is that the economy is not showing any sign of stabilising even after subjecting people to such pain. The relief that might have come in the wake of declining international energy prices has been eroded by an unprecedented drop in the value of the taka.

The electricity price increase will be a multi-pronged and multiplying cause for concern: shopkeepers will pay more bills and ask for higher rates. Hotel owners will now pay additional bills and add them to customer charges. Expect even welding shops to ask for more because running their machines is now becoming costlier.

As is well known the cabinet recently amended the Bangladesh Energy Regulatory Commission (BERC) Act 2003 to include a provision that would allow the government to adjust the prices of gas, electricity and fuel in special circumstances. Before this, BERC held public hearings for adjusting gas and electricity prices and announced its decision 90 days later.

In Bangladesh dozens of power plants run with an energy efficiency of less than 30 per cent, meaning they burn too much fuel and produce too little electricity, putting pressure on import-dependent fuel supplies. Many power plants cannot operate continuously due to low plant factors. The other big problem is the captive power plant sector.

Without addressing all these issues the power sector will continue to face crippling problems.

While the country's economy, especially the export sector, has started to turn around despite the instability in the global economy due to the Ukraine-Russia war, experts believe that the surge in electricity prices will have an adverse effect on the economy.

We believe that the price hike could have been avoided or delayed if the government took strict measures to stop illegal connection and wastage in the electricity sector. We hear regular talks of adopting austerity measures. However sheer wastage of electricity by public sector bodies is open knowledge. The system loss in the power sector has been a perennial issue that has been causing immense harm to the sector.