The government raises the retail tariff for electricity, ranging from Tk 0.28 to Tk 1.35, while the bulk rate will be set at Tk 1.88 through an executive order announced on Thursday, effective from February 1.
The Ministry of Power, Energy and Mineral Resources issued a gazette on the same night, explaining the rationale behind the price hike.
The government plans two further electricity price increases by September 2024, bringing the total increase for the current fiscal year to 15 per cent. This aligns with a condition set by the International Monetary Fund (IMF) for disbursing a USD 4.5 billion loan before the finalization of the national budget.
Previously, State Minister for Power, Energy and Mineral Resources Nasrul Hamid had announced the tariff hike to take effect on March 1st. He clarified that the new tariffs, ranging between Tk 0.34 and Tk 0.70 per unit, would depend on the consumption volume of different consumer categories.
However, concerns were raised regarding how consumers would pay Februarys bills without prior knowledge of the increase, and how utility agencies would manage pre-paid and post-paid consumer charges ethically.
Additionally, the concern about post-paid consumers potentially exceeding their budget was highlighted.
The government simultaneously increased bulk electricity tariffs by an average of 8.5 per cent, or Tk 0.75 per unit, on Thursday. This bypasses the Bangladesh Energy Regulatory Commission (BERC), raising questions about the lack of cost reduction review and the authoritative nature of the decision.
Consumers will face a 5 per cent further increase after Eid-ul-Fitar, followed by another by September 2024, as per the Power Division.
"This will help reduce BPDB losses by Tk 3,000 crore," State Minister Nasrul Hamid told reporters on Thursday.
He explained that the IMF condition had already prompted an increase in bulk power tariffs from Tk 5.17 to Tk 6.70 per unit in December 2022 (approximately 19.92 per cent), alongside a gas tariff increase. Despite these efforts, BPDB and BPC continue to experience significant losses.
"We have faced losses due to selling electricity below production cost," the Minister acknowledged, justifying the recent increase. "We are trying to raise the prices gradually." He emphasized that the increase was minimal and that lifeline subscribers (using up to 75 units) would face minimal impact.
He reiterated that electricity is currently subsidized, with an average production cost of Tk 12 per unit compared to the average selling price of Tk 7. The price increase was also framed as a step towards reducing government subsidies for the power sector.
The Minister further announced the implementation of a fuel pricing formula starting March 1st, linking the price of petroleum fuel to the international market. He added that the fuel price would be declared for consumers monthly.
The BPDBs Annual Report 2022-23 reveals a significant discrepancy in production costs. While the average cost per unit from BPDB plants is Tk 7.63, independent power producers (IPPs) charge Tk 14.62, rental plants Tk 12.53, public plants Tk 6.85, and imported power from India costs Tk 8.77.
Despite spending Tk 98,646 crore to generate 87,024 million kilowatt hours of electricity in the 2022-23 fiscal year, the BPDBs per unit production cost was Tk 11.33, while the selling price remained at Tk 6.70, resulting in a loss of Tk 4.63 per unit. This imbalance contributed to a staggering loss of Tk 47,788 crore for the year.
The government faces the challenge of purchasing electricity worth Tk 82,778 crore from private producers while only generating Tk 13,307 crore from its own plants, leading to significant financial strain.
The Consumers Association of Bangladesh (CAB) contends that addressing potential mismanagement within the power sector, estimated at Tk 30,000 crore, could eliminate the need for further tariff increases.
