Home ›› 31 Mar 2023 ›› Editorial
The recent price hike of electricity within three weeks would deepen the already existing crisis of the private sector especially small and cottage industries, SMEs, Micro-industries. On January 2023 the price of electricity was raised by 5 per cent further. Government raised the price of electricity and gas mainly to reduce the quantum of subsidy, but in return it would affect the cost of doing business and increase the cost of living of the people. This would make the poor poorer. The bulk price has risen by 8 per cent. The demand charge for electricity for almost all types of consumers has been up by 42 per cent. By an order the authority on January, 2023, raised the piped gas prices by up to 179 per cent.
The rise in prices would put a negative impact on all sectors of the economy including manufacturing and services. Business people feel that the price hike would increase the cost of doing business and add fuel to inflation, putting people in real hardship. Experts believe that if the authority could stop the system loss and could disconnect the illegal electricity and gas connection, a 10 per cent costs would be avoided
Bangladesh economy has been facing a challenge due to ongoing global economic crisis and disruption in supply chain.
At present consumers in Bangladesh are embattled due to record commodity prices following a historic liquid fuel price hike are now set for another battering with a 5 per cent increase in electricity price. This is for the first time BERC without public hearing increased the price. This increase will provide the authority a net income of Taka 30,000 million to its coffer annually. In this respect BERC put up a face saving argument that shortage of natural gas in the country and use of imported liquefied gas, the increase in the price of fuel oil in the international market and devaluation of Taka compelled the Ministry of Energy and Mineral Resources to raise the price. But never did they put up the system loss and illegal electric connections to be one of the major causes behind price hike.
According to BERC electricity prices were revised on the request of the distribution companies. On the other hand demand charges have been raised by 200 per cent from Taka 5.00 to Taka 15.00. Normally power cuts delay production process and make it a challenge to meet the manufacturing deadline for exports, reducing the global competitiveness of exportable. Some experts point towards shortage of gas to be the main cause behind recent power generation disruption.
This has resulted in load management. The present power production and consumption in Bangladesh has one national grid with an installed capacity of 25,700 MW as of June, 2022. The energy sector is not up to the mark in Bangladesh. Per capita energy consumption in Bangladesh is higher than the production. Despite the fact that Bangladesh is co-operating with other 30 partner organizations for improving access situation in rural areas, yet the pace is slow at the rate of 76 per cent. Total energy access is 55.26 per cent (national), Rural 42.49 per cent and Urban 90.1 per cent. Action programmes needed to solve the current problem are pervasive.
The main way out is to increase production capacity. For that it is to be ensured that exploration and excavation of natural gas in the offshore and onshore sites be expedited. People engaged in energy production and generation should put emphasis on renewable energy which would be the source of future global energy including Bangladesh. In this regard a pertinent question is as to how the general public could be plugged to get out of the current crisis.
We must find a solution to get out of the crisis, otherwise a bigger disaster would be waiting for us in the future. The way out is to increase the national capacity. So we need to ensure exploration and excavation of natural gas and put more emphasis on renewable energy. Recent gas crisis has taken a disastrous proportion. In many parts of Dhaka city there is no gas supply all day. Despite the global rise in energy prices, Bangladesh has at times seen fixing prices disproportionately higher in comparison, but when global prices plummet, the earlier fixed prices never to go down.
The reason being is that most of the markets are not regulated by the government directly. It is determined by the distributors. But to many of us the price is to be determined by the government since it is a strategic commodity, which is politically sensitive and the government should be the regulator.
The energy prices are to be determined by the BERC along with tripartite meeting with stakeholders after conducting hearing of public opinion about real costs including international buying price, freight charges, tariffs and internal transportation costs.
However, determination of price mechanism has been violated frequently and energy sector has been subjected to a “Cat and Mouse” game. On the other hand, ordinary public have been experiencing tremendous inflationary pressure for some time now.
One of the measures taken by Trading Corporation of Bangladesh (TCB)to sell essentials at rationing prices in the urban areas to ease the pressure to some extent. In the nineties a government closed down a department (Prices and Market Intelligence) responsible to monitor and regulate prices of essentials, so that no one can go for formation of syndicate to market exploitation. Had the department been in existence at least Ministry of Commerce could have some power to regulate inflationary trend. With the abolition of the department of Prices & Market Intelligence in 1990, consumers are left at the mercy of the whole seller and retailers
to suffer.
When the economy is at such peril, an increase in energy price had been a blow to the economic life of the poor and the middle class.
Even TCB’s endeavors could not ease especially middle class urban people’s hardship as neither can they stand on the queue nor can afford to buy at higher prices. In the rural areas vulnerable groups enjoy some support against higher prices, but such facility should be made universal. The decision to hike fuel prices will hurt everyone in the society. Trade syndicates should be brought to books. Bangladesh Competition Commission is a toothless tiger. Market monopolization must be stopped with immediate effect.
BERC by passed the public hearing with ill intention. Although BERC made a statement that the consumers at retail level should not feel the pinch of the rise of prices. According to Power Development Board’s (PDB) estimated proposal, a need of around Taka 740,000 million to generate around 89000 million KWs of electricity to supply to power distribution companies. Even if the electricity so generated is sold at Taka 5.17 per unit PDB has to face a deficit of Taka 170,000 million in revenue excluding government subsidy. PDB while announcing the new rate (Price) calculated the government subsidy would be around Taka 170,000 million.
It appears that the power sector is there to produce electricity not for the people but for the profit making of the distribution companies. The ultimate victim is the people of the country.
In the final conclusion it is seen that the victims of price hikes are the export sectors and the ordinary people living in the community. One loses competitiveness in export markets and the other one is the fixed income people who are to balance their cost of living. In the export sector Readymade Garments producers have to face formidable challengers like China and Vietnam in the global textile market.
The sector is suffering already from gas shortage. Hike in the electricity prices is a knockout blow for them. On the other hand, consumers already grappling with soaring cost of living because of the recent price hike of the fuel oil, high inflation and devaluation of Taka are poised to take another blow. With the price hike, the distribution companies will earn an additional Taka 80,000 million from consumers in 2022-23. Due to recent hike in prices of liquid fuel and gas and devaluation of Taka the average inflation rose to 7.7 per cent, the highest in the last 11 years, Amid this recent inflation, low and middle income people are struggling to manage the cost of living in rural and urban areas.
With recent increase in electricity prices people’s sufferings will aggravate further. This calls for a way out. This justifies a call for withdrawal of the recent increase in prices or an increase in wages and income to ensure a decent living. On the other hand to combat inflation production should be increased, essentials and food markets monitoring be launched and food support to poor be introduced. Beside the distribution companies should be more efficient and operate on the basis of efficiency, economy and effectiveness to reduce system loss and be tough on corrupt practices.
The writer is former Director General of Export Promotion Bureau. He can be contacted at [email protected]
