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Power & Energy - 2 weeks ago

Crisis in energy sector will intensify

Depreciation of taka

Mahfuz Emran: Bangladesh Bank has done a major devaluation of taka against the US dollar. The country’s economy will suffer in the long run. The cost of import will increase many times. In particular, the import cost of gas, fuel oil and coal will increase. As a result, the cost of power generation will increase. At the same time, the cost will increase in paying the bills of the multinational companies operating in the country.
Experts in the energy sector say that the devaluation of the currency will put the energy sector under severe pressure and crisis. Because our energy sector is import dependent. This will have a negative impact on the users. Bangladesh University of Engineering (BUET) former professor and energy and sustainable development expert Ijaz Hossain told, “Due to currency devaluation, the power and energy sector will be under severe pressure. The industrialization that is happening now may not continue. Such underestimation is a bad sign.’
He said, power and energy sector is import dependent. Depreciation of taka will increase imports.
In fact, which direction the situation will go, can’t be specified now. But there will be a long-term pressure, that’s for sure. There may be further devaluation of money in the future. The dollar will be traded at the new rate from Sunday. After a week of trading it will be understood which direction the situation will go.
The sector stakeholders say that currently the power and energy sector is suffering from cash and dollar shortage. In other words, fuel imports are sometimes interrupted.
Now the electricity and energy sector has thousands of crores of arrears. Meanwhile, the government is unable to pay these dues due to lack of money and dollars. Apart from this, if the import cost of fuel increases, the cost of production will also increase. As a result,supply cost will also increase in parallel. And if the cost of supply increases, so will the subsidy.
They also say that recently, under the pressure of the IMF, the government has planned to gradually withdraw from subsidies in various sectors. The government has hiked electricity prices by executive order to reduce subsidy on electricity. In the future, electricity prices are said to be adjusted three to four times a year. That means electricity prices will increase further in the future. Inflation will increase one more time.
Acknowledging the matter, Minister of State for Power, Energy and Mineral Resources Nasrul Hamid said that increasing the price of the dollar will create additional pressure on electricity and fuel. The matter will be discussed with the Governor of Bangladesh Bank.
It is known that till January of this year, the amount of bill arrears in the electricity sector is about Tk 60 thousand crores. Among these, the capacity charge (excluding local consumption) of private power plants and the price of fuel in dollars have to be paid to the Power Development Board (PDB). Bill of electricity import from India has to be paid in dollars. Due to the increase in the price of the US currency, PDB will incur an additional cost of around Tk 3 thousand crore in paying this arrear. Apart from this, dues of Chevron and dues of Petrobangla due to import of LNG are about $400 million. Due to the devaluation of the taka, the additional expenditure of the organization in domestic currency will be about Tk 300 crore.
Due to the dollar crisis, Petroleum Corporation (BPC) has accumulated arrears of about $320 million due to the purchase of fuel oil. Of this, ITFC’s loan is Tk 2 crore. The rest is owed to foreign oil supply companies. BPC will have to spend an additional Tk 250 crore to repay this arrear due to the increase in the value of the dollar.
This year electricity subsidy has been estimated at Tk 44 thousand crores. However, as a result of increasing the price in Dudfa, the subsidy has decreased by about Tk 6 thousand crore. According to the finance department, a Tk 1 increase in dollar value increases the electricity subsidy by about Tk 474 crore. If the price of dollar increases by Tk 7, the subsidy will increase by about Tk 3,318 crore. Private power entrepreneurs said that due to dollar crisis and arrears, LCs can’t be opened properly. Now the price has increased again. As a result, there will be a loss of Tk Tk400 to Tk 500 crore in the previous LCs.

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