Home Power & Energy Energy sector mgt a big challenge
Power & Energy - December 18, 2023

Energy sector mgt a big challenge

Staff Correspondent: If everything goes well, the 12th National Assembly polls will be held at the beginning of the new year. The government will adjust the price of energy products in the country’s market after the elections as per the conditions given to the International Monetary Fund. However, the energy department has to deal with the rising dollar price, the international market price and the debt payment of domestic and foreign institutions. Analysts fear that if the price is adjusted in the new year, the overall cost of the consumer will increase several times with inflation.
According to them, energy management will be a challenge for the government in the post-election economy. High dollar value and abnormal fluctuations in the prices of energy products in the international market may further complicate the situation in this import-dependent sector.
Cost of living will further increase due to price adjustment with higher import prices. But it remains to be seen how much the price will be under control. There is no alternative to ensuring good management in this sector to ensure economic stability and reduce pressure on reserves in the new year. Energy analyst and Consumer Association of Bangladesh (CAB) Energy Advisor M. Shamsul Alam.
He told, “The economy will not run for a moment without fuel.” Also, one of the logistics of new employment and GDP is energy assurance. So, the government must ensure good governance and good management in this sector. Otherwise, higher production costs in the new year will increase the cost of living of people.
Those concerned say that initially the new government will have to deal with 4 challenges in the energy sector. Among them, the import of energy from relatively affordable sources according to demand, its expenditure and payment of arrears (dues to domestic power companies and foreign exporters), pricing strategy of energy products at the current dollar price and reserve conditions, revision of the existing policies.
Fuel price adjustment: The terms of the International Monetary Fund (IMF) loan agreement called for removal of subsidies in the fuel sector. As part of this, the subsidy was reduced by increasing the price of fuel oil in August last year and gas and electricity in 3 steps at the beginning of this year. However, despite pressure from the IMF since May, time has been sought to not adjust prices until the elections. The IMF agreed to this for political reasons. Last December 13, the company released another installment of the loan. As a result, the energy department said that the price will be adjusted according to the conditions in January.
Earlier, Finance Secretary Khairuzzaman Majumder said, “The IMF agreed to give three months to Bangladesh in a meeting with the Ministry of Finance in September, but the ministry has promised that the prices will be adjusted only after the elections in January.”
Finance department officials said that after December, an automatic system will be introduced to determine the market price of fuel oil in coordination with the international market. Petrobangla has already prepared a formula and submitted it to the Energy Department. The formula calls for fixing prices at the consumer level every three months or every month. If it comes into effect in January, the price of fuel oil may increase by Tk 10 to Tk 15 per liter based on the current dollar price and the price of fuel oil in the international market.
As such, energy analysts have suggested public hearings instead of executive orders to determine the prices of energy products. In this case, even if the price increases, the people will judge its fairness and help the government to manage the situation. And if prices are increased by executive orders like before without public hearing, the crisis may worsen. Also, Bangladesh Energy Regulatory Commission (BERC) should be kept independent in exercising its powers. The stakeholders see the price determination through public hearing as the first challenge of this sector. Amidst the current economic situation and severe foreign exchange crisis, the government has signed an average LNG import contract of about 1 cargo per month from spot. But imports under long-term contracts will cost half of that. However, this year the government signed two new long-term agreements with Qatar and Oman. But the supply will start from 2026. For this reason, analysts have urged to be more inquisitive in the selection of sources for importing fuel oil and coal, including LNG.
Apart from this, the government has signed an oil import agreement worth about Tk 24 thousand crore for 2024. According to the information of the Energy Department, there are plans to further increase the import of fuel oil in the coming year. As a result, the expenditure in this sector may exceed Tk 70 thousand crore. Similarly, as several new coal and LNG based power plants are launched, the cost of coal and LNG will also be reduced by about Tk 60 thousand crore. The current dollar value means spending 20 percent more on the same amount of fuel than in previous fiscal years. M. Shamsul Alam thinks that it is impossible to restore stability in this sector in the existing energy policy. He said, ‘If fuel security is not ensured, the economy will not be secure. Therefore, first of all, the government should take the initiative to repeal or revise the Electricity and Energy Act 2010 in a big way. Because the import market may not be affordable. As an alternative, additional costs should not be imposed on the public.
According to this analyst, if the energy sector is commercial in an emerging economy like Bangladesh, common people will not be able to bear this huge cost. So, there is no obligation for the IMF or any donor group to accept all the terms. First of all, it is more important to ensure energy to the people at a fair and affordable price, indirectly keeping the market affordable by reducing the cost of production. Therefore, even with subsidies, it is necessary to keep the prices affordable in this sector. The problem will be greatly reduced if the government delists energy as one of its sources of revenue.
According to NBR data, the government is making a profit of Tk 6000 crores from fuel alone in the last financial year even after paying taxes. For this, the price at the consumer level had to be increased by 40 percent. As a result, the overall production cost including electricity has increased up to 30-50 percent. Besides, food inflation has increased from 8 percent to around 14 percent.

Check Also

Restoring people’s confidence vital for boosting insurance sector

Special Correspondent: President of the Bangladesh Insurance Forum (BIF), BM Yusuf Ali, ha…