There is a good case to support government plans to increase the price of electricity even though global oil prices have been going down over the past year.
A high price for electric power will incentivise the private sector to invest more in building new power plants. This is vital to close the huge gap between demand and supply that holds back industrial development in the economy.
It will also enable subsidies to be cut and assist Bangladesh Petroleum Corporation in paying back some of the several billion dollars it has received in fuel subsidies over the past decade.
The tax-payer money saved during the window opened by lower international oil prices can be used to top up much needed funds for government schools and hospitals and provide targeted financial aid for poorer consumers.
Maintaining a high price of electric power will also motivate rural households to continue to invest in household solar power systems, which are proving invaluable in bringing clean renewable power to households which can benefit from it most.
Just as it was a mistake for the government to waste tax-payer money subsidising energy use when oil prices were high, it would be folly to cut prices now when as a finite resource, the price of imported fossil fuel can be expected to start rising again.
Tax-payer funds should not be used to subsidise finite fossil fuels. As well as being expensive and adding to greenhouse gas emissions, subsidies have proven to impose more costs on the public in the long run, by distorting the market and preventing investment in new and more reliable power generation.
A sensible long-term approach to pricing is imperative to facilitate the long-term investment that industries and consumers need to be assured of uninterrupted power, and to grow investment in renewable energy.
