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The Financial Express

Power tariff hike and its ramifications

| Updated: October 05, 2022 14:47:02


Power tariff hike and  its ramifications

The recent announcement by the Bangladesh Energy Regulatory Commission (BERC) that bulk prices of electricity will be raised upward could not have come at a worse time. That the Bangladesh Power Development Board (BPDB) has proposed a 66 per cent rise citing dearth of gas and oil points to the direction and magnitude of hike.

Whatever the BERC's decision is it would come as a shock to both industry and consumers. The regulatory commission has already raised natural gas tariff by 22.78 per cent as of June 2022. At a time when the readymade garments industry (including textile industry), that generates the bulk of export earnings of the country is reeling from a serious drop in gas supply, such hike would be another nail in the coffin. Objections have been raised by both consumer rights organisations and trade bodies which have proposed several measures as alternatives to raising prices. For instance, withdrawal of import duties and taxes on furnace oil imposed  in June 2020 will reduce the electricity-generation cost.

Although belated, but recent drives by Titas Gas Transmission and Distribution Company have disconnected some 250,000 illegal gas connections pointing to the culture of siphoning off precious natural gas on a daily basis. By Petrobangla's own estimates anywhere from 250 to 300 million cubic feet of gas can be saved if illegal connections can be minimised.

Today, system loss in the country's gas distribution system stands at around 10 per cent, which is estimated at 1-2 per cent internationally. At a time of depleting gas reserves, such drives against illegal connection must become the modus operandi.

Our energy sector planning has not benefitted from any serious effort to exploit our own natural gas potential, both onshore and offshore. Furthermore, no effort has been made to extract domestic coal deposits. On the other hand, policymakers have undertaken major projects to build coal-fired power plants that will use imported coal. It is estimated that when all these power plants come on line, the government will have to import 66 million tonnes of coal annually to generate 22,000MW of electricity. At a time when foreign reserves are under tremendous pressure, how will we foot the bill?

With the war between Russia and Ukraine showing no signs of stopping any time soon, this situation has pushed up the prices of coal, oil and LNG in the international markets. With Europe bracing for a harsh winter, predictions point to that continent snapping most of the available LNG from the international market, adding another blow to our energy mix where share of imported liquid fuel (furnace oil and diesel) has gone up to 34 per cent.

The other problem being Bangladesh's over-dependence on natural gas based infrastructure where industry has become used to subsidised gas. With the rapid rate of decline in domestic natural gas production and steady increment of LNG imports, indefinite subsidies for primary fuel supply is simply not feasible. Again, if production input costs continue to rise (this includes cost of fuel and overall cost of doing business), it would be extremely challenging for businesses to maintain their competitiveness.

It is time to rethink the import-dependent primary energy mix taking into account both price and availability.

We need to move beyond utopian ideas and adopt a policy of open pit mining at proven coal fields of Phulbari-Barapukuria, which according to experts can provide 1.0 billion tonnes of good quality coal. External uncertainties in the international arena have proved that we cannot afford to be fully import-dependent (BUET experts earlier made analysis and projected that the Bangladesh economy will be 90 percent imported-primary energy dependent up to 2030 if the present course remains unchanged) anymore and must take hard decisions to extract own reserves of coal. Simultaneously, gas exploration needs to be become a national priority. We need affordable sources of energy and that can only happen when the bulk of it comes from domestic sources.

 

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