For two months during last year, the government had to spend 70% of its total subsidy in the power sector for purchasing electricity from independent and quick rental power plants.
The government disbursed Tk1,297.49 crore to the Power Development Board for the months of October and November in 2014; of this amount, Tk932.24 crore was allotted for buying electricity from the quick rental plants.
The Finance Division issued a letter yesterday to Power Division Secretary Monowar Islam, granting the disbursement of the subsidy as a loan to the PDB – with a 3% interest rate along with a five-year grace period.
The Power Division will now have to pay the loan back in six-month instalments, meaning it would take 15 years to pay back the entire amount, according to the letter.
An official of the Finance Division said the government has loaned the PDB Tk5,000 crore in subsidy between July and November last year, with most of the amount earmarked for quick rental plants.
The government has already increased its power subsidy allocation to Tk9,000 crore from the Tk7,228 crore allocation set in the budget for the ongoing fiscal year, as the production of quick rental plants had increased during the time, said the official who requested to stay anonymous.
For the next fiscal year, the amount of power subsidy however is expected to be less than Tk6,000 crore, he added.
Several meetings had been held between the Finance Division and the Power Division for reducing the cost of each unit of power purchased from rental plants, but the initiative fell apart because of interference from the politically influential people involved with the rental power business, the official said.
According to the PDB, average cost of every unit from furnace-oil-run rental power plant is Tk15.50, while the cost of each unit from diesel-run rental power plant is Tk19.50; for the PDB, the average cost of every unit of electricity generation is now Tk6.10. The PDB sells the power to consumers for a price of Tk5.75 to Tk6.5.
The Power Division claimed that it would be able to save Tk3,200 crore as it negotiated lower tariff while renewing the tenure of some 13 rental power plants having capacity to generate 877 megawatts of electricity.
Currently, the PDB purchases 1,420MW electricity from rental and quick rental power projects and 1,066MW from independent power plants.
Earlier, in the revised budget for the 2013-14 fiscal year, the government raised its subsidy allocation for rental power by Tk500 crore from the original allocation of Tk5,000 crore.
