The government has disbursed Tk1,171.72 crore credits for April and May to the Power Development Board for purchasing electricity from independent, rental and quick rental power plants, of which above 80% was for quick rental plants.
The bills for quick rental plants in these two months stood at Tk949.57 crore, which officials at the Finance Division said definitely put pressure on the exchequer.
The Finance Division issued a letter to Power Division Secretary Monowar Islam yesterday, disbursing the loan to the PDB with a 3% interest rate.
As per the letter, the Finance Division disbursed Tk667.04 crore for the bill of April, of which Tk621.13 crore was for quick rental plants. For May, it paid Tk378.35 crore with Tk328.44 crore for these plants.
In fiscal year 2009, the average production cost of electricity was Tk2.55 per kilowatt, which rose to Tk6.7 in FY2013 because of the payment to rental power plants. The average production cost of power at quick rental plants in 2013 was Tk11 per unit, according to the PDB.
The PDB purchases 1,405MW electricity from rental and quick rental power projects and 1,066MW from independent power plants. Two months ago, the government raised the subsidy allocation for rental power in the revised budget for this fiscal year by Tk500 crore from Tk5,000 crore.
The 9% increase in subsidy was revealed at a recent inter-ministerial meeting of the Finance Division.
Power subsidy has been increased by around 15% to Tk7,000 crore, while fuel subsidy has been slashed by 67.35% to Tk2,400 crore in FY2014-15 as the government pledged to the International Monetary Fund.
In April, the World Bank recommended phasing out quick rental power plants and stopping payment to firms that are out of production to ease the government’s subsidy burden as it has started renewing the contracts.
To date some contracts have been renewed on a ‘no power, no payment’ basis, while some rental prices have come down. More should be done to reduce the cost of rental power and eventually phase it out, said the World Bank in its Bangladesh Development Update.
It also suggested hiking the prices of gas, electricity and petroleum products to cut the huge amount of subsidy, which was 0.1% of the GDP in FY2009 compared to 1.7% in FY2013.