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Govt mulls subsidy adjustment within 3 years

Ashraful Islam Raana
23 Feb 2024 22:05:58 | Update: 23 Feb 2024 22:05:58
Govt mulls subsidy adjustment within 3 years

The government is planning for subsidy adjustment within next three years by raising energy prices gradually.

To this end, the government is going to increase the prices of gas and electricity again from March.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid dropped a hint in this regard. He said that they are considering increasing the prices gradually without imposing the burden on the people.

Power Division indicated that per unit electricity price may go up by Tk 0.30 to Tk 0.70 at consumer level.

Last year the electricity price had been increased by 15 per cent in 3 phases and the gas price by up to 179 per cent.

The Ministry of Power, Energy and Mineral Resources acknowledges that consumers are under mounting pressure due to high inflation. There is no option but to raise prices to phase out subsidy, it said.

However, the civil society and opposition parties also protested the government’s decision on energy price hike.

Energy experts say that it is possible to adjust subsidies without energy price hike. They are suggesting phasing out the projects which are increasing the cost burden.

Energy expert Prof M Shamsul Alam said despite gas shortage, the government is constructing several gas-fired power plants. They will receive capacity payments even if they do not supply electricity. It will increase the cost burden. There are many unnecessary projects in the power sector that should be phased out and it should not increase price.

The Centre for Policy Dialogue (CPD) recently said that the capacity payment method should be changed along with the cancellation of rental power plants to reduce costs in the power sector. That is why CPD has demanded the implementation of ‘’No Electricity No Pay’’ method.

Nasrul Hamid said that for the time being, the residential gas price will not be increased. The price of gas used by power stations, including captive generators and fertiliser factories, will increase. The new rates will come into effect from March 1, he added.

Power Division says that the local currency has depreciated against the USD which affected the electricity generation cost. At present, there is a loss of around Tk 40 against per dollar. The losses are increasing as the government pays the energy and power prices in USD.

Nasrul Hamid said, “Due to USD shortage and increasing value of foreign currency, the expenditure in the power and energy sector has increased a lot. So, now we have to adjust the price.”

Energy Ministry said that those who are financially well off in the country waste gas and electricity but they are also getting the subsidy benefit. The government wants to provide more benefits to low-income and comparatively less power users.

That’s why the price may increase by Tk 0.30 to Tk 0.35 per unit for lifeline consumers and increase the cost by Tk 20 to Tk 30 per month for a consumer.

Power Division says that there are around 14 million lifeline consumers who used electricity at a cost of Tk 4 per unit.

However, the electricity price will increase by less than Tk 0.70 per unit for those who use 200-600 units. But the price will increase by Tk 0.70 per unit for those who use above 600 units.