No roadmap for cutting energy costs

Originally posted in The Daily Star on 11 June 2022

Say experts about proposed budget

Photo: The Kathmandu Post/Asia News Network

The proposed budget for the 2022-23 fiscal year does not outline a roadmap for reducing gas imports by increasing domestic production.

There was also no mention of phasing out the highly expensive quick rental power plants, something recommended by experts for years.

“We need to focus on overhauling and augmenting the old gas wells and completing the offshore survey to reduce our high dependency on imported LNG and fuel. But we saw nothing about this in the proposed budget,” said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue.

Other experts said the volatile prices of fuel and liquified natural gas at international markets would be a major challenge facing the sector.

Finance Minister AHM Mustafa Kamal proposed allocating Tk 26,066 crore, down by Tk 1,418 crore from the outgoing fiscal year, for the power, energy and mineral resources ministry.

Of the proposed amount, Tk 24,196 crore will be spent on the power division and only Tk 1,870 crore on the energy and mineral division.

“As long as we continue to buy expensive power from the rental power plants and do not increase the production of gas and coal from our fields, an increase or decrease in the budget allocation will have little impact,” prominent energy expert Prof Shamsul Alam told The Daily Star.

“Our capacity to generate low-cost electricity rises almost every year. But we don’t utilise the capacity. We buy power from the expensive rental plants instead.”

The finance minister did not disclose the exact amount of subsidy to power and energy. He simply said an estimated Tk 82,745 crore will be required to subsidise fuel, gas, electricity, fertiliser, etc.

CPD estimated that the subsidy would be Tk 17,000 crore for the power sector, up by Tk 5,000 crore from the current fiscal year.

According to CPD, the transmission and distribution of electricity are still getting less priority in the power sector as 58 percent of the annual development programme is allocated for generation, and only 21 percent each for transmission and distribution.

The additional amount will be needed because of higher prices of imported fuel and payments for rental power plants, CPD Executive Director Dr Fahmida Khatun said at an event yesterday.

The high fiscal pressure may persist unless the country moves away from the expensive oil and LNG based power plants, she said.

Expressing a similar view, Prof Shamsul Alam said the increase in subsidies will not benefit consumers. “It will benefit the businesses only,” he added.

The government has plans to gradually increase the prices of fossil fuel, gas, electricity, and chemical fertilisers, the finance minister hinted in his budget speech.

Bangladesh Energy Regulatory Commission recently held a public hearing on an application by Bangladesh Power Development Board to hike electricity prices. The regulator has already hiked the natural gas prices by 22.78 percent on an average this month.

Besides, State Minister for Power, Energy and Mineral Resources Nasrul Hamid last week hinted at hiking the fuel prices while talking to this correspondent.

“Now we are worried about the hike in fuel prices in the international market,” he said.