Raising gas and electricity tariffs is rational under the present context, but not a permanent solution, analysts said yesterday.
They suggested enhancing efficiency and stopping wastage at the operational level and investing in the energy sector to get good results in the long run.
Exporters say they will lose the competitive edge in the world market because of the price hike.
Analysts gave their immediate reaction to the decision to increase gas and power prices. Yesterday, average power and gas prices were raised with effect from September 1.
“Retail price adjustment is an easy way to cut losses, but not a solution for the long-run,” World Bank lead economist Zahid Hussain told the Dhaka Tribune.
He said the power tariff hike will reduce the losses of the Power Development Board, who are supposed to receive Tk9,000 crore as subsidy, which is 78% of the total revised health sector budget for the current fiscal year.
“But the bottom-line is that efficiency needs to be enhanced and wastage needs to be stopped at the operational level for better outcomes in the future,” he said.
Backing gas price hike, he said this was long overdue as it was heavily under-priced and had been failing to attract investment.
“For rational use and attracting investment, increase of gas price was necessary. However, the government should ensure availability of gas for the industries so that the entrepreneurs can offset losses due to price hike.”
Zahid recommended formulating a coordinated energy pricing policy, which could be more rational and acceptable to the people.
CPD Executive Director Prof Mustafizur Rahman said such hike in gas and power tariff would have impact on households, producers and exporters.
“But given the current inflation rate, the price hike is rational,” he said, adding that with this rationalisation, the government should take parallel initiatives for matching demand and supply gap.
He said falling fuel oil prices in the global market helps the government cut expenditure on subsidy – this benefit should be translated into investment in the energy sector for increasing production and ensuring availability.
BGMEA Vice-President Shahidullah Azim said: “Power and gas price hikes will hit the export-oriented industry by pushing up production cost and forcing the sector in the face of tough competition in the global market.”
Cost of manufacturing readymade garments has already had gone up by 15% due to implementation of new wage structure and graduation of safety standards, he said.
To remain competitive in the global market, the government should offer special rate for the export oriented sector especially for the apparel sector, he said.