BPDB eyes 80.75pc tariff hike at bulk level

Bangladesh Power Development Board (BPDB) plans to increase 80.75 per cent tariff at bulk level from next month to reduce its losses.

With a view to making the power sector a "zero subsidy" entity, which is a major condition to get a loan of USD 4.5 billion from the International Monetary Fund (IMF), Power Division asked the BPDB to make a fresh proposal over the issue, however, the Power Division will scrutiny it first, and getting the green signal, the BPDB will submit it to the Bangladesh Energy Regulatory Commission (BERC) for a hearing.

"Power Division has asked the BPDB to make a presentation showing different scenario of tariff hike proposal to achieve the zero subsidy target. It asked to make alternate proposals of tariff hike by 80.75 per cent (zero subsidy), 15 per cent, 10 per cent and 5 per cent hike respectively at the bulk level and also to submit a separate proposal to hike the tariff at retail level," according to the Power Division.

Presently, the BPDB has been incurring a loss of about Tk 5 per unit, said an official of BPDB adding that the gap between the production cost and sales rate is being covered by the subsidy from the government.

In its earlier proposal (submitted in December,2023), the BPDB said that to implement "Zero Subsidy" formula, BPDB needs to increase bulk tariff from TK 6.70 to TK 12.11 and to address the transmission loss and operative cost of the power distribution agencies, it need to increase retail tariff from TK 8.25 to TK 14.68.

"IMF has asked the government to reform its subsidy schemes in gas, power and fertilizer. It has sought a specific timeframe about the desired reforms. Also, it asked about the governments plan over handing over the loss-making companies kept alive by the subsidies to the private sector," Power Division Senior Secretary Habibur Rahman told the Daily Observer on Sunday.

Presenting the present scenario of BPDBs financial book, it said the operating loss of the BPDB went from Tk 6,200 crores in FY 2018 to Tk 27,477 crores in FY 2022, an increase of 217.1 per cent over four years.

Meanwhile, a recent report from the Implementation Monitoring and Evaluation Division predicted that the BPDBs total loss for FY 2023 and FY 2024 could be Tk 1,13,532 crores or the average annual loss will be TK 56,766 crores.

"Last year, the BERC increased the power tariff, the per unit electricity purchase price from the public and private sectors has also increased. In the case of the public sector, the purchase price has increased from Tk 4.52 kWh in 2018 to Tk 4.75 kWh in 2023. On the other hand, in the private sector, the purchase price has increased from Tk 5.72 kWh in 2018 to a staggering Tk 11.55 kWh in 2022," BPBD book said.

Despite the rise in power tariff, still the BPDB has been incurring huge losses. The IMF has been insisting on further raising the tariff, but rising prices are not associated with the changes in the energy costs, energy adviser of CAB Dr Shamsul Alam said.

To meet the IMF condition, a number of measures have been undertaken to reduce losses, including upward adjustment of retail prices of electricity but it could not be achieved. It means that the increasing growth of BPDBs losses is not related to the rise in energy prices alone.

"Capacity payments to private, rental, and quick rental power plants have increased from Tk 5,376 crores in FY 2017 to as high as an estimated Tk 28,000 crores in FY 2023. The percentage change in the amount of capacity payment is unbelievably high - 420 percent from 2016-17 to 2022-23. In the last one year, the change in capacity payments was up by 16.7 percent. It should be noted that the total capacity will further rise to 31,000 MW by 2925, and the excess capacity by that time will be as high as 36 percent (or 11,191 MW)," a BPDB official said.

To manage the crunch, the BPDB takes subsidised credit from the government every year. The amount of subsidies has increased from Tk 4,000 crores in FY 2017 to Tk 23,000 crores in FY 2023, and this is expected to rise to TK 32,000 crores in FY 2024, he said.

"Official data shows that BPDB incurred losses, but also transferred cash to the exchequer, paid dividends, and invested in fixed assets. Such financial activities have been carried out without addressing the BPDBs overgrowing financial losses. And again, it has all the while been acquiring subsidised credit from the government. Overall, the financial transparency of the BPDB is questionable, and we believe that if we could be able to stop all these anomalies there would be no question of subsidy in power sector or increase tariff," Professor Shamsul Alam of CAB said.