The government is likely to lose more than Tk 20,000 crore in the current fiscal year in the form of subsidies in energy and power sectors, if prices of oil, gas and electricity are not increased, exerting perennial pressure on the national exchequer to source funds for the purpose. While electricity prices had remained subsidised for long, requiring about Tk 6,000 crore this year, the government has now begun giving subsidies in gas, which is estimated to be Tk 5,600 crore in a year. Meanwhile, a rising oil price in the international market has caused Bangladesh Petroleum Corporation (BPC) to lose money and the state-owned corporation has already sought Tk Tk 8,000 from the government as subsidies for the 2018-19 fiscal year.
Experts on the energy sector said ahead of the national elections, at the yearend, the government is not considering any unpopular decision to raise gas, oil or electricity prices for now. Such decisions to bankroll the power sector is taken at the highest policymaking level, The Independent has come to know.
In the ongoing fiscal year, the government is subsidising the gas price for the first time, as it is importing liquefied natural gas (LNG) at a rate much higher than that of the locally produced gas.
The first consignment of imported LNG has already arrived and has been added to the national grid. It is blended with local gas, which has made the price spurt. The per unit cost of imported LNG is Tk 25.17; after adding tax and regasification charges, the total cost comes to Tk. 29.35, according to Petrobangla, the state-owned energy company.
The cost of production per unit of gas is now over Tk 10, after the LNG and local gas are blended. The average retail price of gas
supplied by Petrobangla from domestic sources is Tk 7.37 per cubic metre.
After the LNG is blended with the natural gas, in a single month—from August to September 2018—the government has lost Tk 536 crore. According to the estimates by Petrobangla, it will need to pay Tk 5,600 crore annually to subsidise the gas even after some tax waivers on LNG imports.
Various companies of Petrobangla have already proposed that the Bangladesh Energy Regulatory Commission (BERC) should increase the gas price from Tk 7 to Tk 40 in various sectors like power, fertilisers and CNG for auto-rickshaws.
Again, after a few years of low prices, fuel prices have started rising on the global market. This means that the need for fuel subsidies has emerged once again. The government currently imports around 70 lakh tonnes of oil per year through its Bangladesh Petroleum Corporation (BPC).
Petroleum prices dropped drastically on the global market in 2014 and remained almost steady for the next three years. The BPC had incurred losses from fiscal year 2009–10 onwards till the 2013–14 fiscal year and made huge profits in the following three years.
Since November last year, the BPC has been incurring losses. Now the amount stands at Tk 24 crore a day, said a BPC official. “If it continues in this manner, we may not be able to log in any profit for this fiscal year,” he added.
“If the price of oil in the international market does not decrease, the loss will be more than Tk. 8,000 crore annually. Hence, to continue oil supplies in the local market, we need Tk 8,000 crore for the next few months. We have requested the finance minister to release the money to the BPC,” said a BPC official.
High fuel prices also compel the government to bankroll the electricity sector. This is because of the total of 123 power plants in the country, 54 are fuel oil-based. The Bangladesh Power Development Board (BPDB) on average spends around Tk. 6.25 to buy a single unit of electricity but it sells it at Tk. 4.84. Which means that the government subsidises Tk 1.41 per unit, making for a total amount of some Tk 6,000 crore per year.
“Last year (2017–2018), we incurred a loss of Tk 8,500 crore as we had to use oil for generating electricity. But right now, after importing LNG, gas supplies to the power plants have been increasing. This makes the cost of electricity low compared to the oil-based power plants. However, the price of furnace oil is going up in the international market. This has become a source of worry for the Bangladesh Power Development Board (BPDB) and the government as well,” said a Power Division official.