The total budgetary allocation for power sector subsidy in the immediate past fiscal year was Tk22bn.
But the Bangladesh Power Development Board (PDB) has sought Tk15.73bn as subsidy to pay the due bills of the quick rental, rental and independent power producers (IPP) for the last quarter of the 2012-13 fiscal.
Sources said the government generally purchased power from the rental power plants at high cost and sold it to consumers at considerably lower prices. This has forced the government to cover up the gap by giving high subsidy.
State-run PDB owes around Tk15.89bn to the quick-rental power plants, and around Tk1.15bn to the rental power plants for the last quarter of the previous fiscal.
The government generally does not pay any subsidy to the IPPs because these low cost power plants are powered by natural gas and have in fact made around Tk1.32bn profit during the last quarter.
“Most of the subsidy is drained out in paying for quick-rental power,” said an official of the finance division.
He also said some influential owners of the high-cost and oil-powered rental and quick rental power plants, generally meant for meeting short-term needs, had been pressurising the government to chalk out long term agreements for 15-20 year periods instead of going for gas powered base power plants.
On an average, PDB purchased around 1500MW of electricity every day from rental and quick rental power plants during the last fiscal year, board officials said.
At present the government purchases electricity from 12 rental and 15 quick rental power plants, powered either by furnace oil or diesel, and six IPPs.
Apart from the monetary cost, the environmental impact of these fossil-fuel powered plants is also massive, environmentalists say.
PDB Secretary Azizul Islam sought the money from the government’s finance division through a letter last week.
“PDB needs Tk15.73bn subsidy for the last three months [of the previous quarter] because electricity had to be purchased from rental, quick rental and IPP power plants at high rates and supplied at a much lower rate,” the secretary said.
They also said in recent times the PDB has been seeking subsidy every three months to pay the dues of the expensive rental power plants.
The finance division has been providing the subsidy as soft loans at 5% interest for a five-year term, they added.
According to a finance division report, the power sector has been running on a loss of Tk1.37 per unit which, the report predicts, will stand at Tk51.70bn and Tk55bn in the 2012-13 and 2013-14 fiscal years respectively, due to the wide gap between supply cost and selling price.
However, PDB officials have expressed hopes about being able to reduce the amount of subsidy sought if the government hikes the price of electricity at the consumer level again.
The current government has raised power tariffs seven times since it came to power in 2009. The last time the Bangladesh Energy Regulatory Commission (BERC) increased power tariffs was in September last year.
The International Monetary Fund has also been asking the government to increase power tariffs for a long time.
The international lender said the government must stop giving subsidies in order to eliminate financial losses of power companies and public enterprises which burdens the public finances and pose a threat to macro-economic stability.
