The government and the International Monetary Fund are at loggerheads over extension of quick rental power plant and price adjustment of automobile fuel oils under the Extended Credit Facility.
The World Bank and the IMF prescribed the price adjustment for automobile fuel oils to bring home rates at par with the prices on the global market at a meeting of the visiting IMF article 4 mission with the finance and energy divisions.
The global lenders want the government to raise the fuel oil prices in January and introduce the fuel price adjustment because Finance Minister AMA Muhith signed an accord with the IMF, an official who attended the meeting said.
An official at the finance ministry told the Dhaka Tribune that the IMF had imposed the condition of increasing prices of fuel oil and electricity under the ECF programme.
However, the government is unwilling to make “unpopular” decisions, such as increasing fuel oil prices, ahead of the next general elections.
It increased the prices of petroleum products for the fifth time last January. It increased the prices of diesel and kerosene by Tk7 and octane and petrol by Tk5. The government has also hiked the price of electricity on six occasions.
Bangladesh Petroleum Corporation Chairman Md Eunusur Rahman told the Dhaka Tribune that the subsidy on diesel had been reduced to Tk9 per litre as the price fell on international market and this helped increase the corporation’s liquidity.
“So, there is no possibility that the prices of fuel oils will be increased in the next five months,” he said.
He added that the government had provided the BPC with Tk60bn last year as subsidy and the corporation had sought money this year too.
Meanwhile, Power Division officials said they were contemplating to extend the rental and quick rental power plants until 2020 as most long-term base-load power projects, including coal- and gas-fired plants, as well as the proposed nuclear power plant at Rooppur, were expected to generate electricity by then. The IMF supported the present government’s initiative to set up quick rental and rental plants at the beginning of its tenure, but now it has opposed the extension plan.
“Most of the subsidy is spent in payment for quick rental power,” said an official of the Finance Division, which three weeks ago disbursed Tk15.86bn as subsidy for paying the dues of quick rental and rental power plants.
He said the country’s budget deficit might widen if the rental power arrangements continue. The total budgetary allocation for power sector subsidy in the past fiscal year was Tk22bn