With the national budget for FY23 to be finalized in the next few days, it is extremely important to reconsider the energy and power sectors of the proposed budget, as it is more of a long-term sustenance issue rather than just revenue generation.
The budget did not assure consumers would get some relief by adjusting energy prices and ensuring the supply of electricity at the right price.
The power and energy sector is under pressure due to the rise in import costs of petroleum, LNG, as well as coal. The sector is having difficulty despite a significant rise in subsidies being accommodated as there is a lack of initiatives to reduce excess capacity in generation that might further worsen the situation.
On top of that, there is limited effort to ease the pressure by undertaking a renewable energy-based energy mix, as well as a lack of effort in exploring domestic gas to meet the gas shortage, as imported LNG - still a major energy mix - would escalate the cost pressure further.
Experts said this on Sunday at a hotel in Gulshan during a discussion session organized by the Center for Policy Dialogue (CPD) titled “Energy and Power Sector in the National Budget FY23,” chaired by its Executive Director Dr Fahmida Khatun.
Speakers also said that generation-based projects are the priority in the power sector budget, while distribution-related projects continue to get neglected as growth in allocation is getting slower.
Despite being burdened with overcapacity, even in this fiscal year, the power sector is continuing to give priority to generation-related projects under ADP, they said.
In his keynote presentation, Dr Khondaker Golam Moazzem said the power and energy sectors were under pressure due to rising import costs of petroleum, LNG and coal.
“It is difficult to adjust the expenditure even after a significant increase in subsidies. Without extra initiatives, the situation could get worse. While renewable energy has the potential to be a good alternative, it has been overlooked,” he said.
Professor Shamsul Islam said that the price of fuel oil has gone up globally. “Our domestic fuel demand has also increased. So, the price of our fuel will go up. If the price of fuel goes up, the price of electricity will also go up. That is the reality. But this sector has long been plagued by unjust spending and corruption. That expense is protected by special law,” he added.
He further pointed out that the government is currently generating electricity commercially and buying it at a higher price while giving it at a lower price, causing a deficit of Tk20,000-22,000 crore.
In his keynote presentation, Dr Khondaker Golam Moazzem said that the total number of projects in fuel and energy has decreased significantly.
The ongoing FY22 is an eventful year for the power and energy sector. Bangladesh has achieved the milestone of 100% electrification and the prime minister has announced the target to achieve 40% of renewable energy by 2040 as part of shifting from fossil fuel to clean energy.
In FY22, there were 27 projects, while in FY23, there will only be seven projects. The implementation rate of the projects under fuel and energy shows a mixed pattern with three continuing, three carry-over, and one concluding.
There are a total of 22 projects under distribution. These are ten carry-over projects, six concluding and six continuing projects. Even though the number of distribution-related projects is the same as the generation-related projects, there are no approved projects for the next fiscal year
There are a total of 17 projects under transmission. The project number in transmission has increased in FY23 compared to that in FY22 (15). There are eight carry-over projects, two concluding projects and eight continuing projects. All the projects under the transmission category are under the Ministry of Power, Energy and Mineral Resources (MoPEMR).
The commitment to focusing more on transmission and distribution is not well reflected as the number of carry-over projects is much higher than concluding projects.
Furthermore, there is only one LNG-based project in the ADP for FY2022-23 under MoPEMR. Even though this is a concluding project, the maximum completion rate by FY2023 of this project is 15%. Given the excess capacity at hand, these types of projects need to be abandoned.
Government should allocate funds for the exploration of gas and seismic survey at the offshore level as well as exploring gas in old gas plants as no new development project in transmission has been approved for the upcoming fiscal year, the keynote presentation said.
However, Imran Karim, president of Bangladesh Independent Power Producers Association, said that there is a shortage of supply systems and that is why load shedding is taking place. “Our actual capacity in electricity is 16,000 megawatts, which is nothing. We need to have at least 20% more power generation capacity,” he added.
Overall, the power and energy sector is under fiscal pressure at the end of FY22 despite having a number of achievements. It is expected that the national budget for FY23 will take into consideration issues such as adjustment of the capacity payment, necessary fiscal allocation to accommodate required subsidies and continuation of tariffs at the consumers’ end, given the inflationary pressure.
An energy mix with renewable energy could be a possible option, which has been ignored systematically and the national budget FY23 is expected to address some of the concerns, the think-tank hoped.
Experts also said that higher allocation for quick implementation of transmission and distribution-related projects is required to reduce excess capacity by less allocation for generation-related projects, particularly those related to fossil-fuel-based generation projects (LNG and petroleum and dual-fuel-based projects) while putting emphasis on projects related to energy-efficient technologies.
