BM Report:
The Center for Policy Dialogue (CPD), a Dhaka-based think tank, has raised concerns about the rising cost of electricity in Bangladesh and called for long-term solutions to mitigate the financial burden on consumers and businesses.
A key issue identified by the CPD is the mismatch between power generation capacity and actual electricity consumption. Capacity has grown at a significantly faster pace than demand, leading to a situation where the government incurs substantial costs for unused capacity.
Despite government subsidies, the power sector continues to experience losses due to high procurement costs and reliance on expensive fuels such as LNG, furnace oil, and diesel. Recent global energy price hikes have further exacerbated the problem.
The CPD criticizes the current system of negotiated electricity procurement, arguing for a shift towards competitive bidding through open tenders. This, they believe, could lead to cost reductions by introducing greater market discipline.
A recent CPD survey of primarily low-income households predicts a projected 9.5% increase in electricity bills under the new pricing structure. This translates to an average additional cost of Tk 115 per household.
The new rates are expected to have a significant impact on various sectors. Small and medium enterprises (SMEs) face a projected 9.12% increase, businesses a 9.7% rise, and industries a 10% hike. The agricultural sector, despite typically having lower electricity bills, stands to experience the highest increase at 11%. This poses a potential challenge for food production costs.
The CPD expresses concern over the apparent loss of autonomy of the Bangladesh Energy Regulatory Commission (BERC) in adjusting electricity prices. They advocate for transferring the responsibility of overseeing price increases back to BERC to ensure transparency in the process.
The think tank proposes a multi-pronged approach to address these challenges and ensure long-term affordability including phased power plant shutdown. Strategically shutting down power plants with high operational costs can help optimize capacity and reduce unnecessary expenditure.
Implementing clear and predictable pricing policies allows consumers to better understand the factors influencing electricity costs. A shift towards a competitive bidding system for electricity procurement has the potential to bring down prices.
Investing in and promoting renewable energy sources like solar and wind power can offer a long-term solution for sustainable and cost-effective electricity generation.
The government needs to develop a well-defined and transparent plan for subsidizing electricity costs, ensuring targeted support for vulnerable households and essential sectors.
By implementing these CPD recommendations, Bangladesh can navigate the challenges of rising electricity costs and lay the foundation for a more sustainable energy future.
