Bangladesh Power Development Board has proposed to increase the bulk price of a unit of power by 80.74 per cent as the Awami League government opted to withdraw subsidy in the power and energy sector in less than two weeks after assuming power for a fourth straight term.

If the government implements its plan to withdraw power and energy subsidy next year, it would require an 89 per cent rise in bulk power prices, according to a BPDB account.

With Bangladesh’s economic condition turning from bad to worse, the government is under obligation to reduce its subsidy burden, particularly for the $4.7 billion loan being released by the International Monetary Fund.

The BPDB proposed raising the per unit bulk electricity price to Tk 12.11 from Tk 6.70 between February and December this year, suggesting four possible ways of implementing its proposal.

The price hike scenarios make it clear that consumers have a very tough time ahead, though there is no guarantee of an uninterrupted, quality power supply, experts in the field said. The price hike planned this year could be implemented step by step over the next 11 months, the BPDB proposed, or every three months or in two phases to enable the government to get rid of subsidy. ‘The hike in the electricity price was long overdue, but the government asked power companies to wait until the general election was over,’ said Mohammad Hossain, the director general of Power Cell.

He said that the government’s power distributors had been forced to sell electricity below production costs. Bulk electricity represents the power PDB sells to its six distributors. A hike in the bulk power price naturally entails a retail power price hike.

Dhaka Electric Supply Company Limited managing director Kausar Ameer Ali said that they were losing Tk 50 crore every month, and an 8 per cent increase in their current price could bring the company to break even.

‘Power companies are in urgent need of money to run before their losses climb in the upcoming summer months,’ he said. The recently released annual report of the BPDB showed that the state-owned company’s loss jumped to Tk 11,765 crore in the past fiscal year from Tk 3,232 crore the year before, requiring over Tk 32,000 crore in subsidy.

The BPDB’s loss quadrupled in the past year, mainly because of a dramatic increase in capacity charge and fuel costs. ‘Reasons for this hike include huge power over capacity and wrong power and energy planning,’ said Ijaz Hossain, a power sector expert who teaches at the Bangladesh University of Engineering and Technology. Bangladesh cannot use half of its more than 25,000MW installed power capacity, which is likely to rapidly increase over the next few years amid sluggish economic growth.

The overcapacity cost the government Tk 17,156 crore in the past year, up from Tk 13,701 crore paid the year before. The PDB annual report said that about 15,000MW of new generation capacity would be added from fossil fuel-based power plants by 2030.

In the first scenario of the power price hike, the PDB proposed an increase of 5 per cent every month over the next 11 months. The government will still need a subsidy of Tk 25,922 crore throughout the year before the power price reaches the level where no subsidy will be required in January next year.

The second price hike scenario proposes an increase of 10 per cent in the bulk price between February and July. This scenario reduces this year’s subsidy requirement to Tk 8,571 crore.

Under the second scenario, the government can stop paying subsidy in August this year. The third scenario requires the payment of Tk 21,770 crore in subsidy between February and December after the power price is increased by 16 per cent every three months between February and November.

The fourth scenario offers to increase the power price in two phases, with the first increase of 40 per cent in February and the second increase of 30 per cent in July.

The BPDB calculation is based on a power mix in which gas accounts for 50 per cent of all power production in a year, fuel oil accounts for 8 per cent of power production, coal for 23 per cent of power production, imports account for 17 per cent, and renewable energy for 0.94 per cent.

Power generation growth this year is projected to be 10.09 per cent. Bangladesh produced 87,040 GWH in the past year, following 3.68 per cent growth. This year, power generation is projected to be 95,805GWH.

The BPDB calculation is based on the assumption of the use of 1004mmcfd of gas in power production, up from 964mmcfd used last year. The per cubic metre gas price this year is presumed to be Tk 14.

A tonne of locally extracted coal price was estimated to be $185 against the presumed imported coal price of $135 a tonne. The potential consecutive power price hikes are a grim reminder of the four phases of power price hikes in bulk and retail levels since November 2022.

People are still struggling to cope with the ever-increasing cost of living in the aftermath of the last energy price hikes, three of which came in the first two months of the past year. The price hikes in the past year came through executive government orders, bypassing public hearings, which the government made redundant in late 2022 through an amendment to the law.

Energy experts and economists said that price hikes would not make the dollar crisis go away but would rather increase living costs, making life difficult for everyone, particularly the poor and people on fixed incomes.