Monday, May 27, 2024

Govt can now raise fuel, power prices, bypassing regulator

Originally posted in The Business Standard  on 29 November 2022

The cabinet on Monday approved an amendment to the current energy law, empowering the government to adjust fuel and electricity prices under “special circumstances”. The amendment bill will now be placed in parliament and turned into a law subsequently.

This will annul public hearing and tariff decisions by the Bangladesh Energy Regulatory Commission (BERC) and pave the way for introducing dynamic energy pricing in Bangladesh amid turmoil in the global market following Russia’s invasion of Ukraine.

According to the Bangladesh Energy Regulatory Act, tariff adjustments were vested in the BERC. However, the Ministry of Power, Energy and Mineral Resources increased the fuel prices in August this year by issuing a notification, which was challenged with the High Court later.

After the cabinet meeting chaired by Prime Minister Sheikh Hasina, Cabinet Secretary Khandker Anwarul Islam, however, told journalists that the amendment is meant for averting “complications”.

“We now have the BERC handling all these [tariff adjustments]. The BERC has some issues such as it cannot finalise prices before a 90-day timeframe. But sometimes we have immediate needs,” he said.

Explaining the amendment, the cabinet secretary said it will enable the government to determine the tariffs on its own under “special circumstances”.

Responding to a query about what the definition of the “special circumstances” will be, Khandker Anwarul Islam said the country is now facing a “special situation”. “In such cases, the government will consider expert opinions prior to the decisions.”

The BERC is an autonomous body which was established based on the Bangladesh Energy Regulatory Act 2003, aiming at improving power and energy infrastructure in Bangladesh. The law was amended thrice in the past.

When asked if the latest amendment move would curtail the commission’s authority, the cabinet secretary said the BERC will set the tariffs in normal times, while the ministry will exercise the power in “special circumstances”.

However, Ghulam Rahman, a former chairman of the energy regulator, said the amendment will curtail the BERC’s authority.

“The amendment seems to legalise the government’s previous illegal tariff hikes. It also appears that the government is not comfortable with the 90-day process incorporating transparency, accountability and people’s stake,” he commented.

To cut energy and power subsidies, there has been push from the foreign development partners and lately from the International Monetary Fund (IMF) over a $4.5 billion prospective loan to Bangladesh for introducing the dynamic energy pricing.

Unlike the subsidy-reliant administered pricing mechanism, local prices are synced with international ones in dynamic pricing.

At Monday’s meeting, the cabinet also discussed whether all types of fuel can be imported privately; as fuel is now only imported by the government. The cabinet secretary said the government will finalise the decision in this regard soon.

The cabinet meeting also approved the draft of the Bangladesh Medical Education Accreditation Act, the draft of the Bangladesh Biman Act and a Memorandum of understanding (MoU) about manpower export to Brunei.