Tuesday, May 07, 2024
The Centre for Policy Dialogue (CPD) has strongly slammed the recent electricity price hike, calling it a burden on consumers and a result of the government’s mismanagement of the power sector.
At a press conference held on Wednesday at Dhanmondi in Dhaka, the private think tank also presented a scathing critique of the government’s policies which, they said, have led to the ongoing fi nancial crisis in the power sector.
CPD Research Director Khandaker Golam Moazzem highlighted several problematic practices, including bypassing bidding rounds for electricity purchase, establishing ineffi cient power plants, Quick Enhancement of Power and Energy Supply Act (Special Provision), the capacity payment method and reliance on expensive ‘quick rental’ power plants, continued operation of ineffi cient power plants, using highcost fuel.
He argued that these policies have infl ated the cost of power generation, and instead of addressing these issues, the government is putting the burden entirely on consumers.
The latest price hike has resulted in signifi cant increase in electricity bills across all sectors, ranging from 9.5 per cent for households to 11.2 per cent for irrigation, 9.12 per cent for small industries, 9.71 per cent for commercial and 10 per cent for large industries.
CPD expressed concern that rising electricity costs for irrigation could threaten food security. They further noted that the price hike has been continuing for a year, with previous increase in 2023 and additional hikes planned for the future.
The CPD research director said that the electricity price hike has been going on unabated for the past one year.
In January, February and March 2023, it was increased by 5 per cent each month.
In February this year, the price was increased by 8.5 per cent. It is being said that this price hike will continue, and it will be increased in two more phases. “This is a matter of great concern for us,” he added.
The power sector is facing repeated electricity price hikes due to capacity payments. If the unreasonable capacity payment is adjusted, there would be no need to increase the electricity price in such way.
CPD says that the excess power generation capacity was 35 per cent in 2022, which increased to 38 per cent in 2023. The government is constantly relying on LNG-based power plants. This is increasing the production capacity as well as risk because there is uncertainty about LNG supply.
“Whether or not these power plants will generate power and capacity payments will have to be made if COD is done. It will increase the pressure on the consumers,” said Golam Moazzem.
He further criticised the lack of transparency in the price hike, pointing out that it was implemented through an executive order, bypassing the Energy Regulatory Commission. He has claimed that this undermines accountability in the power sector.
The CPD presentation revealed that the government’s subsidy adjustment will only amount to Tk 2,650 crore, leaving a significant funding gap of approximately Tk 39,000 crore. If the government was to pass this entire cost onto consumers, the price of electricity could skyrocket to Tk 16.40 per unit, a disastrous outcome for the economy.
The private think tank proposed a four-point alternative plan to achieve subsidy adjustment within five years.
This plan includes phasing out outmoded and inefficient power plants according to the government’s existing plan, implementing a “no electricity, no pay” system for new power plants, renegotiating existing contracts with a focus on “no electricity, no pay” terms, gradually replacing closed power plants with renewable energy sources as the government aims to reach 40 per cent renewable energy usage.
CPD believes that by implementing these strategies, the government can achieve its subsidy adjustment goals without further burdening consumers and ensure a more sustainable growth for the power sector by 2029.
