Unrealistic policy inflates GDP: Debapriya Bhattacharya

Interview published in The Daily Observer on Saturday, 18 April 2014.

Unrealistic policy inflates GDP, says Dr Debapriya

Jannatul Ferdousy

For unrealistic policy of the government the country has been successively failing to achieve the targeted GDP (Gross Domestic Product), although the government knows how to make a proper policy it does not do so, economist Dr Debapriya Bhattacharya said  in an interview with the Daily Observer on Friday.

Dr Debapriya has projected Bangladesh’s GDP below 6.0 per cent this fiscal year due to the impact of political unrest while the government has projected 6.3 per cent.

The power situation remains in a flux. When a number of quick rental and rental power plants are expected to be phased out by FY2014, the plants have been renewed this year. This imported liquid fuel based power supply is expected to keep the price of power high. The energy sector should free itself from the grip of the private sector, he said.

Besides that a number of dual fuel and gas-based plants both private and public are expected to come into operation in the current fiscal year.Dr Debapriya said unfortunately the additional gas extracted every year is not being used in the productive sectors like industry, fertiliser and captive power. The entrepreneurs in these sectors are waiting for gas and power connection to begin production.It must also be considered that every day about 1,000 MW of electricity is not being generated due to the shortage of fuel supply, as a result production is being hampered, he added.

Since the government has failed to supply primary fuels for production, it has been failing to achieve the projected GDP for consecutive years. Without resolving half-hazardous communication and infrastructure obstruction, Bangladesh economy will not be able to utilize its full potentials.

According to Center for Policy Dialogue (CPD) study, gas utilization by the industry sector in FY2013 declined by (-) 6.1 per cent. It appears that the highest priority was given to power generation which received 3.9 per cent more gas in FY2013.In FY2014 the World Bank projected country’s GDP at 5.4 per cent, CPD at 5.8 per cent and IMF below 6.0 per cent. The government has projected GDP at 6.3 per cent.

Observer,-Page-01,-April-19,-2014-table

Prof Shamsul Alam, an electrical and electronic engineer, told the Daily Observer that power price hike affects the country’s gross production. Now-a-days almost all production is related directly to electricity, if electricity price go up production cost will also increase. As a result production country’s slows down. Consequently, the government has been failing to achieve the targeted GDP for years. The government has no policy for the control of power price, so it has reached an uncontrollable level. Misuse, stealing, inefficiency, system loss and ambiguity of the government cause the price to hike, he added.

The impact of electricity price is felt in various sectors of Bangladesh economy. From 2008 the trend in prices took a dramatic turn when, in response to serious power supply shortages, massive initiatives to increase power generation capacity was taken. Between 2007 and 2014 the real electricity prices rose by 90 per cent. It is argued that electricity prices must be brought to a level to be ‘cost-effective.

‘If the government wants to achieve the targeted GDP, it will have to ensure power supply up to its power generating capacity. If the Bangladesh Energy Regulatory Commission (BERC) is active and monitor the distribution companies as per the law power price will decrease instead, he added. “Political anarchy affects the GDP not the power price.

We have to adjust power price because power generation and maintenance cost is high. But GDP growth must be in a constant level. For power price hike production in the country will not be affected, said Nasrul Hamid MP, state minister for energy.

“We don’t want any hike, but the recent price hike will not affect production massively,” said Kazi Akram Hossain, president FBCCI.

According to the World Bank’s report, Bangladesh is far from its 7.2 per cent GDP target in the 2013-14 fiscal years.