Originally posted in The Business Standard on 31 January 2023
Another bolt from the blue hit consumers after the government again hiked electricity prices by 5% at the retail level.
At a time when citizens are already feeling the heat from spiralling prices of commodities, the rise in electricity price – set to be effective from February – will hit where it hurts the most: quickly depleting wallets.
Less than three weeks on 12 January, electricity prices had been increased by 5%. The hike was retrospective in nature, as it would apply for the entire month.
This time, however, the government has decided the new hike will come into effect from February, allowing consumers to know beforehand that they would have to adjust power consumption.
Following two hikes in less than a month, the average retail price has been increased from Tk7.13 to Tk7.85 per kilowatt hour at the customer level, according to Monday’s gazette issued by the Ministry of Power Energy and Mineral Resources.
The hike coincides with the $4.7 billion loan approval by the International Monetary Fund (IMF) sought by Bangladesh.
When the money-lender was sitting in a meeting in Washington to approve the loan, a gazette was also being issued in Bangladesh regarding the price hike of electricity – both news reached the public at the same time.
The hike is believed to be part of reforms given by the IMF for the loan approval.
Pakistan, which has also sought IMF support, is also mulling increasing in energy prices to appease the money-lender.
This is the third time the Bangladesh government used its newly-granted authority to adjust the price of electricity without a public hearing by the Bangladesh Energy Regulatory Commission (BERC), an already contentious matter.
Distribution companies had applied for at least a 15.43% increase in retail/consumer-level electricity prices to cover their financial loss against the 20% price increase at the wholesale level.
Professor M Shamsul Alam, energy adviser to the Consumers’ Association of Bangladesh, during the earlier hike in the first week of January, had said, “Amid this unprecedented inflation and the wage gap, required revenue of the distribution companies could be managed without hurting the consumers at micro and macro level of economy.
“Desco is in a surplus revenue situation. If you look at the financial reports of other companies and their sources of income, you will find that none of the companies need to increase their distribution charges,” he added.
Monday’s ministry gazette also mentioned that the retail price of electricity will be adjusted every month. Following the two price hikes, the consumer will have to pay an additional Tk5,800 crore to the power companies if this rate continues for a year.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruqe Hassan requested the government to defer the new electricity price as energy prices had been increased recently
“This utility price hike will create more inflationary pressure, which will increase bank interest rates- all are in a chain,” he said.
“Due to the additional cost, we will lose our competitiveness at global markets as the exporters have been facing the effect of the Russia-Ukraine war-driven slowdown in orders,” Faruqe Hassan further said.
BGMEA Vice President Shahidullah Azim said the government should not increase gas and electricity prices suddenly,
“If they take a such move that will put a burden on public life. Utility prices hike will increase about 40% of our production cost,” he added.
“Rising electricity prices at the consumer level will certainly put another strain on our production costs. On the other hand, the cost of living of our workforce will further increase while commodity price inflation is already putting a huge strain on our daily lives. I don’t know who will compensate the extra bill, because our FOB price is shrinking a lot,” said Cute Dress industries Ltd Managing Director Sheikh H M Mustafiz.
On 12 January, the government announced a 5% increase in electricity prices to Tk7.48 per kilowatt hour at the retail level.
Earlier on 8 January, the technical evaluation committee of Berc recommended around 15% retail electricity price hike at a public hearing against power distribution companies’ proposal to increase the price on an average by 20%.
Although the latest price rise may come as a shock, Berc Chairman Md Abdul Jalil had hinted that the retail tariff might be higher than what the technical committee recommended if the government stopped providing subsidies on electricity.
The Berc chairman had said on 7 January the commission would announce the retail price hike by 30 January after analysing all the recommendations made during a public hearing.
Meanwhile, the government hiked gas prices on 18 January this year by a staggering 179%, with an eye on eliminating subsidies and cutting the fiscal deficit. The massive hike left industry leaders and energy experts stunned just a few days after electricity prices increased.
The Energy and Mineral Resources Division said the current global energy situation amid the Russia-Ukraine war had resulted in volatility in all types of energy prices.