Published in New Age on Friday, 28 February 2014.
Recipe for suffering
Mahfuzul Haque reveals how an imminent hike in power and gas tariff will intensify inflation affecting livelihood
Harunur Rashid, a private service employee and resident of Dhanmondi, read that the tariff of gas and electricity will be increased once again by the government. A frustrated Rashid tells Xtra, ‘This means I would not only have to pay more for electricity and gas but also for other items, thanks to this step.’
Over the last three to four years livelihood cost has doubled. ‘During the beginning of this year, my landowner increased the house rent. Though the power outage crisis has improved a bit when compared to previous years, I still suffered from power cuts even during the winter season’, he adds.
‘I am paying enough but not getting the output to that proportion,’ Rashid expresses his dissatisfaction.
A similar question is present in the minds of most Bangladeshis who point out that gas crisis like power outages are still continuing in most parts of Bangladesh including the capital city.
In areas like Mirpur, Shyamoli, Farmgate and Kalabagan, households receive gas four to five hours a day with low pressure that is inadequate to cook even daily meals.
Merina Sultana, a housewife of Shyamoli area, share, ‘From morning till 3:00pm, the gas pressure is so low that no meals can be cooked. As a result I have to use cylinder gas to cook breakfast and lunch.’
‘The gas pressure becomes normal after 10:00pm when I do not have any reason to use it,’ Sultana says. ‘If I do not receive timely service, then why will I pay more for it?’ she asks.
The government is contemplating yet another hike in retail power prices from the coming month. Earlier this month, Nasrul Hamid, state minister for power, energy and mineral resources, hinted about the government’s considerations to increase the power and gas tariffs.
Bangladesh Energy Regulatory Commission (BERC) sources say that the commission will hold hearings on increasing electricity prices on March 4, 5 and 6 and the decision will be effective from March 1. BERC is also planning to hold a hearing as Petrobangla has sent a proposal for increasing gas tariffs.
The government initiated the fresh step after assuming office in January this year. During its previous tenure, the retail price of power was increased six times from March 2010 to September 2012. During that period, the average power price went up by about 60 per cent, from Tk 3.76 a kilowatt-hour (unit) to Tk 6 a unit.
The BERC also increased the bulk price of electricity by 98.31 per cent, from Tk 2.37 a unit to Tk 4.70 a unit, in six phases between February 2011 and September 2012.
State minister Nasrul Hamid informed that the government is taking the step to ease the pressure on subsidies. In the meantime the power distribution companies placed proposals to BERC to increase price as they incur huge losses every year.
According to a New Age report published on February 19, the Power Development Board (PDB) in its proposal sought retail power price to increase by 15.5 per cent to cover up its an annual loss of Tk 516 crore. The DPDC proposed an increase in price by 20 per cent to cushion its annual loss of Tk 64 crore. Similarly, the WZPDC wants to increase price by 8.59 per cent to cover its annual loss worth Tk 95 crore.
To mitigate the crisis of increasing demand for electricity, the ruling party had decided in 2010 to involve private sector in power generation leading to private bodies being allowed to install fuel-based rental power plants. As an integral part of the agreement the government has to pay rental fees to private sector suppliers for their plants whether or not the government buys power from them. Apart from this, as these power plants run on fossil fuel, the cost had increased manifolds intensifying pressure on subsidies and forcing the government to increase tariffs.
In 2010, the government had speculated that the electricity tariff will decrease by 2014 as within this timeframe, the government would be able to maximise electricity generation from large gas-based power plants. ‘But the plan has failed,’ says energy expert Kallol Mustafa. Now the government statement has changed as they say that the operation of fuel-based rental power plants will continue till 2020, Mustafa adds.
Experts believe that the consumers are now carrying the burden thanks to the government’s irresponsible strategies. Professor Shamsul Alam, another energy expert and advisor of Consumers Association of Bangladesh (CAB), says, ‘The government paid no heed to decrease the production cost of electricity. As a result, pressure on subsidy is increasing. Moreover, there is pressure from the World Bank and the International Monetary Fund (IMF) to cut down on subsidies. Though the government earlier said that the electricity cost will decrease from 2014, no effective steps were taken so far to improve the situation.’
Mustafa says despite strengthening the large gas-based power plants where power can be generated at around Tk 1.5 per unit, the government paid its attention to expensive fuel-based plants. About 4,500MW electricity is currently produced from gas-based power plants. ‘Most of these power plants are old and their thermal efficiency is 25 per cent. If the government paid more attention to improve these, we would have an additional 3,500MW electricity without spending any additional amount of gas,’ says Mustafa.
In the meantime the government is yet to decide on coal-fired power plant policies. Professor Alam says that the initiative still remains in speech. ‘The government could not formulate coal policy yet and as a result, the government has been talking about importing coal.’ ‘So far, no progress has been made about where and the cost at which the coal will be imported,’ he says.
Interestingly, the government has recently said that the country now has ability to generate 10,000MW electricity. Mustafa finds loopholes in the calculation. ‘In reality the country has ability to generate a bit over 6,000MW, and the remaining 4,000MW remains in papers,’ says Mustafa. The government estimates the installation ability of the plants, but no plants can fulfill the target. For example, the installation capacity of a power plant of a large private group has been shown 110MW, but so far it is able to generate to a maximum of 42MW, Mustafa adds.
The gas service quality across the city is poor and thousands of illegal connections are worsening the crisis, says Professor Alam. He says, ‘The government is making revenue from the gas sector. Other than increasing gas price the authority should pay attention to improve service quality and take steps against illegal connections.’
Any price hike especially of energy resources affects people from all walks of life. The inflation rate in the country is more than eight per cent. Dr Khondaker Golam Moazzem, additional research director of Centre for Policy Dialogue, says that the step will increase pressure on people especially low income people and farmers. It will also fuel non-food inflation. Without analysing the impacts properly the price hike may cause adverse situations, Moazzem says.