The Bangladesh Energy Regulatory Commission may declare a 15-20 percent price hike on Sunday – putting the base or bulk power price at around Tk5.7 per unit
The authorities are set to hike the base power price for the 10th time in the last 10 years from March 1, affecting both homes and industries, and making exports less competitive.
The Bangladesh Energy Regulatory Commission (Berc) may declare a 15-20 percent price hike on Sunday – putting the base or bulk power price at around Tk5.7 each unit, said a Berc source.
This price will be passed down to the consumers in several slabs.
Concerned by the possibility of a fresh power price hike, business associations unanimously said that the new tariff would make it tough for them to conduct business, which is already struggling with various problems including a global slump.
The cement industry, a highly competitive market, will be in further trouble if the proposed tariff hike on electricity goes through, market players said.
"Production cost per tonne of cement will increase by Tk60," said a senior official of a foreign cement making company.
He said that presently, electricity accounts for 8 percent of the total production cost of cement and the latest proposal may take it to over 10 percent.
Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said since the apparel sector is going through a negative growth, it may be hit hard.
The readymade garments sector is the biggest industrial consumer of electricity.
"This time, price hike of electricity will be a big blow for the industry," he told The Business Standard.
Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry (DCCI), said that due to the new tariff, their cost of doing business will become very expensive.
"Business is becoming difficult due to different reasons, including high port handling charges, taxes and new source of raw material. At this moment, a new price hike will badly effect the profit margin of the companies," Shams explained.
The price of rice would also increase with the enforcement of the new power tariff, said Bangladesh Auto Rice Mill Owner's Association President AKM Khorshed Alam Khan.
"The same applies to all sectors that depend on electricity for their production. This hike would be a big blow to the production cost and it would hike living costs," he added.
Khondkar Ibrahim Khaled, former deputy governor of the Bangladesh Bank, said that instead of hiking the price of power, the government should focus on reducing the system loss and prioritise efficient use of energy.
"Businesses have been struggling for several years in an adverse environment. If the price is raised now, they will fail to compete in the global market," he added.
Back in March 1, 2010 the bulk power price was Tk2.5 per kilowatt hour (or a unit). Since then, the price has increased by 90 percent and the current average electricity price is Tk4.77kWh.
This was being done to adjust losses incurred by the Bangladesh Power Development Board (BPDB) for buying power at a higher price and selling at a lower rate.
Although a decade ago, the government had forecast that the power tariff would peak in the 2015-16 fiscal year and then begin going down with the phasing out of costly fuel-based rental power projects, it did not happen.
On the contrary, the government is today maintaining huge surplus power generation – including that from rental power plants – and thus continuing to count losses.
The government, in its last election pledge, had promised to supply cheaper energy after 2018.
Dr Sultan Ahmed, secretary of the Power Division, said, "Berc is responsible for price adjustment. They fix the price rate considering consumers' affordability and the availability of primary energy.
"Power Division is working to ensure cost-effective energy for citizens," he added.
When contacted, Berc member Rahman Murshed declined to comment when the new tariff would be declared, adding that the authorities follow a specific procedure before announcing it.
"By now, the related departments might have done all the calculations regarding the tariff order. The new order will be announced very soon."
The Berc move is based on a proposal of the BPDB tabled on October 15 last year. The power board wanted Berc's consent to increase the bulk tariff by 23.27 percent to cover its operational deficit.
The power board argued that power generation had become costlier as its primary fuel gas tariff was increased by 41 percent earlier. Besides, they were spending money to import coal for power generation.
BPDB was spending close to Tk9,000 crore as capacity payment – a penalty for keeping running private power plants idle. These plants are being kept idle because the nation now has surplus electricity.
In line with the BPDB, the only state-owned power transmission company and the six distributing companies also submitted their proposals to the pass-through tariff if it is increased in the bulk stage.