The Centre for Policy Dialogue (CPD), on Monday (June 26, 2023), organised a debriefing session for foreign missions and international organisations in Bangladesh on National Budget for FY2023-24: How the Challenges in the Energy and Power Sector is Addressed? The programme was held as part of regular debriefing to the diplomats on various issues related to the power and energy sector of Bangladesh.
No doubt, the power and energy sector of the country is passing a challenging moment this time and confronting numbers of structural, institutional and operational challenges. These include — (a) excessive/overgeneration capacity causing mounting debt burden; (b) over reliance on imported fossil fuels due to inappropriate fuel selection; (c) fiscal pressure created by huge capacity payment which is eating up the major portion of subsidy; (d) escalating electricity and energy tariffs; (e) the utilisaition of fiscal-budgetary support to favour fossil fuels, and (f) a lack of emphasis on exploring alternative and renewable energy sources. Taking account of those challenges, CPD has reviewed and analysed the fiscal-budgetary measures of the national budget for FY2023-24.
Dr Fahmida Katun, Executive Director of CPD, delivered welcome remarks and said the national budget should have the direction to combat the contemporary sectoral challenges and improve the overall health of the power and energy sector.
In his keynote presentation, Dr Khondaker Golam Moazzem, Research Director of CPD, pointed the national budget for FY2023-24 is a ‘business as usual’ budget for the power and energy sector instead of addressing major challenges. So, there are low expectations that the budget — as it has been passed at the parliament in the existing shape — would make little improvement in this sector in particular.
‘The government’s focus on imported Liquefied Natural Gas (LNG) instead of developing the domestic gas sector is detrimental to the foreign exchange reserves, and their increased reliance on coal contradicts their stance against promoting it, while their negligence towards renewable energy persists with no significant policy or initiative for changes,’ said the CPD research director.
He further opined load shedding is most likely to continue, affecting households, businesses, and commercial activities as the global energy prices not to go down in the near future. The power sector will continue to struggle with unreasonable capacity payment — further soaring subsidies and worsening financial position. This raises concerns about the financial viability of public entities like Bangladesh Petroleum Corporation (BPC), Bangladesh Power Development Board (BPDB), and PetroBangla. Their financial accounts lack transparency, consistently showing negative operative income while providing dividends to the exchequer and receiving government subsidies. This makes it challenging to establish a base price for implementing a market-based pricing model for petroleum.
‘The conditionality imposed by the International Monetary Fund (IMF) regarding subsidy management is being implemented solely through price adjustments, unfairly shifts the burden onto energy consumers’, said Dr Moazzem. He emphasised that the IMF reform agendas are insufficient in addressing the challenges and consequences and subsidy rationalisation needs to be done through gradual withdrawal of capacity payment by phasing out Independent Power Plants (IPPs), rental and quick rental power plants. He also underscored making room for renewable and clean energy-based power generation structures.
He urged to focus on upgrading the institutional capacity of Sustainable and Renewable Energy Development Authority (SREDA), emergency power and energy supply act needs to be repealed immediately, and the current draft of Integrated Energy and Power Master Plan (IEPMP) should be revised.
Dr Moazzem recommended the gradual phaseout of the discriminatory fiscal supports provided to the fossil fuel-based power and energy, to create a level playing field for renewable and clean energy. Supportive fiscal measures need to be promoted to encourage domestic and foreign investment in the renewable energy sector development.
The debriefing session was attended by representatives from embassies, foreign missions and delegates, international financial institutions and development partners who participated actively and discussed on concerning issues such as unutlised over generation capacity, over-dependence on imported fuel, especially LNG, unbearable capacity payment, continuing subsidy burden, renewable energy transition, financial situation of public enterprises and so on, following the presentation.