Saturday, December 24, 2011

Govt missteps put burden on people

While the government may have indeed succeeded in increasing power production and the supply of power to the national grid, its errant policies in trying to achieve the increase may very well deprive people in the end of enjoying the access to power. The Bangladesh Energy Regulatory Commission on Thursday, as reported in a news item published in New Age on Friday, increased retail power price by a staggering 20.67 per cent, in two phases, starting December and February next year. Only last February, the government had increased the retail price of power by five per cent. After the changes, the five power distribution agencies will be realising Tk 5.02 on an average up from Tk 4.16 in November. It is pertinent to remember that the government in November hiked the bulk price of power by 33.57 per cent to cut down on government subsidy to the power sector and the present retail power price hike is an effect and continuation of the bulk rise. Since February, bulk power price has already gone up by 57.81 per cent. The government is indeed putting an unprecedented level of burden on retail users of power, within a very short time in which none of the income indicators of ordinary people have improved, and the fear is, over the next of couple of years, bulk prices will see further large scale increases, all of which will later fall upon retail consumers. The BERC has indeed stated its intentions, according to previous reports published in New Age, to double retail power prices in three years time.

The power price hikes, as is common knowledge by now, is being done to cut subsidy to the power sector, which has reached unbelievable proportions ever since the incumbents assumed power and decided to go fuel-oil powered rental power plants to increase the supply of power in the country. Till date, the government has approved 18 quick rental power plants since January 2009. In the first fiscal year of the incumbents assuming power, the expenditure of the Power Development Board alone shot up by 343 per cent.      According to a report published in New Age in November this year, the government spent a staggering Tk 4,000 crore in the preceding 14 months to subsidise rental power plants. According to another New Age report in December, while Tk 30 billion has been allocated as fuel oil subsidy in the budget for this fiscal year, the finance ministry has estimated that the subsidy will eventually stand at Tk. 110 billion.

Needless to point out, these subsidies are causing a huge burden on the public exchequer and foreign currency reserve, as a result of rising import bills accrued through the import of fuel oils, and in effect, has virtually jeopardised the economy. At the retail end, the power price increases are having an adverse impact on the general price index, and inflation in the country has been hovering around the 12 per cent mark over the last six months – one of the highest in Asia.

The government has belatedly decided in December to not go for any more rental power plants, however, it would seem, given that the country’s fuel oil consumption is slated to go up by 33 per cent even this year, the damage has already been done. Under the circumstances, the government would be well-advised to take steps to phase out its dependence on rental plants and reinvest in power plants in the public sector, something that has been sorely missing from their agenda.

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