Power, energy sector seeks Tk 67,000cr as subsidy

The Ministry of Power, Energy and Mineral Resources has estimated that it needs around TK 67,000 crore as subsidy for the fiscal year 2022-2023.
The Ministry of Power, Energy and Mineral Resources has sought a TK 27,000 as subsidy for the Power Division and TK 40,000 crore for Energy Sector, especially for importing LNG from abroad (if the market price of LNG remain same).
However, the Ministry of Power, Energy and Mineral Resources has proposed an allocation of Tk 30,912 crore of it TK 27,711 for Power Division and TK 3201 crore for Energy Division.
"We need this amount to implement about some 60 projects in power sector and 39 projects in energy sector in 2022-2023 fiscal year," a senior official of the ministry said. However, they said that the recent price hike in gas has a little impact there as the BERC has increased it at a nominal rate.
Power and gas are likely
to become pricier next after diesel, kerosene and liquefied petroleum gas as the government looks to calibrate the prices in the local market following a global price spiral since July 2021.
Earlier, it cost Tk 250 crore to bring a cargo of LNG, which is blended with the locally produced natural gas before distribution. Now, Tk 1,250 crore is needed, official said.
A subsidy of Tk 6,000 crore has been assigned for importing liquefied natural gas for this fiscal year. But as per initial estimation, Tk 20,000 crore to Tk 25,000 crore in subsidy may be required to keep the gas price at the current level, official said.
Power Division official said the government may need to give about Tk 27,000 crore as an electricity subsidy if the price is not adjusted.
To manage the subsidy issue, top officials of different ministries including finance, energy and power have sat several times to analyse the impact of the global price escalation on the budget.
On February 22, 2022, during a meeting of the Executive Committee of the National Council (Ecnec), the prime minister instructed the relevant government agencies to gradually cut down on subsidies supporting economic activities of the country.  She specifically mentioned stopping subsidies to the power and energy sectors in Bangladesh.
"The demand for subsidies in different sectors has outweighed the budget allocation for FY22: about 135 per cent of additional budget allocation (Tk 11,500 crore) is required for the Power Sector, 525 per cent (Tk 21,000 crore) to import LNG, and about 194 per cent (Tk 18,500 crore) to produce fertilisers using natural gas," Finance Ministry sources said.
Over the last decade, the BPDB has received a significant amount of subsidy: a total of Tk 71,466 crore between 2010 and 2021-Tk 5,956 crore per year, on average.
The amount of subsidy increased every year. On the other hand, the BPC received a subsidy of Tk 30,086 crore between 2010 and 2015
At present, more than 50 per cent of BPDB's operating expenses are the capacity charges that it has to pay. These charges are a major reason behind the high subsidy requirement of BPDB.
Meanwhile, the private power generation companies enjoy other forms of subsidies, such as long-term tax breaks, duty waivers at the import stage, and lower rates of corporate taxes. Similar tax breaks are also provided to renewable energy-based power producers.
Energy experts said country should focus on exploring local gas reserves more, instead of importing the costly LNG.
"There are several options in exploring local gas reserves: (a) Discovery of gas fields to increase the reserve base; (b) Field development with an increasing number of development wells per field; (c) Resume production at stranded gas reserves; (d) Optimise the production wells; (e) Work over the dried-up production wells; and (f) Recover unconventional reserves," they claimed.