A visiting team of the International Monetary Fund (IMF) has suggested that the Power Division increase the electricity tariffs, especially for industrial uses.
The third review mission of the IMF has kicked off its discussions with the interim government to get a fresh US$3.0-billion IMF loan in addition to its already-granted $4.7 billion under a credit package.
The IMF team, in a meeting with the Bangladesh Power Development Board (BPDB) and the Ministry of Finance has suggested that Bangladesh should raise the electricity tariffs and cut subsidies for becoming a self-reliant country.
The IMF mission will continue the consultations until December 17 as the IMF's agenda includes reviewing nine critical areas, with a focus on aligning power tariffs with actual supply costs as part of a plan to phase out subsidies in the power sector within three years and assess the country's progress in meeting its criteria for releasing the 4th tranche of the confirmed $4.7-billion loan before the national budget.
"The mission sat with the officials of Bangladesh Power Development Board (BPDB) on Sunday, to know about BPDB's strategy to become a non-subsidy economy, to know the path to a subsidy-less annual financial management from the State owned entity," a senior official of the Power Division told the Daily Observer on Wednesday.
They want to know it as the government has allocated some Tk 360 billion as electricity subsidy in the national budget for the current FY 2025. However, almost all of the funds are being spent for paying accumulated dues to independent power producers (IPPs) and rental power plants.
The government had paid a total of Tk 280 billion in capacity charges in FY 2023 to the private, rental and quick rental power producers.
"We informed them about our policy regarding the trimming down of the subsidy gradually, shared with them about the present economic condition of the country, discussed inflation issue also then the mission has suggested increasing the electricity tariffs, especially for industrial uses," said a BPDB official.
Later, the IMF suggested enhancing the electricity price to the consumers or to the industrial users in addition to government policies for cutting down the perennial subsidy and become a sustainable economy, official said.
BPDB's data book showed that it purchases the electricity from the private plants at costs that vary from Tk 14 to Tk 26 per kilowatt hour (kwh) while the average retail price of electricity is Tk 8.95 per unit. The average bulk electricity price is Tk 7.04 per unit.
Most of the IPPs and rental power plants are HFO- or diesel-based station which is costly for generating electricity.
The IMF's directive comes at a critical time as Bangladesh's annual inflation surged to 10.87 per cent in October 2024, up from 9.92 per cent the previous month. The escalation in inflation follows severe flooding in August 2024, which inflicted an estimated Tk 14,421.46 crore in damages and exacerbated the financial hardships faced by a huge portion of the population.
"Power division has shown reluctance to increase power tariffs. Officials cite the dual pressures of high inflation and the economic toll of the recent floods, which have disproportionately affected the poor," official said.
In February 2024, the then government had already raised power tariffs by 20 per cent to secure the next loan installments from the IMF when the inflation rate stood at 9.57per cent.
The IMF team will assess the operational and financial performance of the Bangladesh Power Development Board (BPDB) for fiscal year 2024 and projections for FY2025 and FY2026.
Meanwhile, the BPDB is projected to incur a net loss of Tk 4,809 million in FY 2024-25 after receiving full subsidies, compared to a staggering Tk 89,979 million loss under existing tariffs.
The IMF has also raised question over huge unpaid bills; however, the unpaid electricity bills have accumulated to Tk 459,148 million, including Tk 85,327 million for power imported from India. It also raised question about several power projects contracts including the 1600 MW coal-fired power plant at Godda, Jharkhand, India; a 1320 MW coal-fired power plant at Payra, a 335 MW dual-fuel power plant in Meghnaghat, a 195 MW gas-fired power plant at Ashuganj, a 612 MW coal-fired power plant at Banshkhali and the 583 MW gas-fired power plant in Meghnaghat.
