Rental-IPPs eaten up power sector subsidies

Syed Nasir Hossain: The cost of power generation has been increasing rapidly for three years. Even if the price is increased, the large deficit of income and expenditure can’t be covered. This is increasing the losses of the Power Development Board (PDB).
However, the Ministry of Finance is not giving the entire deficit as a subsidy. Only private sector rental and IPPs (Independent Power Producers) are subsidized to meet the shortfall of buying electricity at high prices. In other sectors, the subsidy is not matching the demand of PDB. This widens the gap between losses and subsidies.
This information was presented recently in a meeting with the International Monetary Fund (IMF) delegation.
It is said that PDB is getting the entire difference in electricity price of rental and IPP as subsidy. Increase in gas price, increase in finance cost (interest rate) and devaluation of currency will increase cost of power generation by PDB itself and other government companies.
Increase in price of electricity is required to accommodate the increased cost.
Even the power sector development fund and six percent advance income tax money is not taken into account in the subsidy exemption by the finance ministry.
According to PDB data, the loss of PDB in the financial year 2022-23 was Tk 51,300.45 crore. Tk 39,534.95 crore will be given as subsidy by the government to meet this shortfall. Although the financial year 2023-24 is coming to an end, the Ministry of Finance has not waived the entire subsidy of the last financial year. However, this money is mainly being used to meet the shortfall in the rental and purchase of power for IPPs in the private sector. No subsidy is being given to the government and PDB centers to meet the deficit.
Meanwhile, due to the decrease in the price of coal and fuel oil in the international market and the increase in the price of electricity in the current financial year, the related parties believe that the loss will be reduced. In this case, the loss can be Tk 44,609.20 crore. However, the loss is expected to increase due to the change in the dollar exchange rate this month. However, based on the previous estimate, a maximum subsidy of Tk 32,123 crore will be available from the Ministry of Finance, which will cover the shortfall in rental and IPP electricity prices.
Earlier, PDB had calculated a loss of Tk 32,891.17 crore in the financial year 2021-22. Tk 29,658.43 crore was allocated to PDB in that financial year. According to this, the loss of PDB in the three years from 2021-22 to 2023-24 financial year will be Tk 1 lakh 28 thousand 800 crore 82 lakh. However, PDB will get a total subsidy of Tk 1 lakh 1 thousand 316 crore 48 lakh. That is, the difference between loss and subsidy in three years stands at Tk 27,484.34 crore.
Although in previous years subsidy was given only in proportion to losses. In the financial year 2019-20, the loss of PDB was Tk 7,448.63 crore and subsidy was given Tk 7,439.44 crore. And the loss of PDB for the financial year 2020-21 was Tk 11,648.63 crore. In that financial year subsidy was given Tk 11,777.91 crore. In those two financial years, against the loss of Tk 19,097.26 crore, subsidy was given Tk 19,217.35 crore. In other words, PDB gets more subsidy than losses.
Incidentally, since 2009, the government approved several rental and quick rental power plants. The capacity charge of these power plants had to be paid in dollars. Although currently the number of quick rentals has decreased. However, existing centers have to pay capacity charges in dollars. After the rental-quick rental, the private sector was allowed to set up several large power plants, known as IPPs. Although the capacity charge of these centers is not paid directly in dollars, it has to be paid in taka based on the dollar exchange rate. As a result, the depreciation of the taka increases the cost of payment of capacity charges every year.
Six percent advance income tax has been added to this. The National Board of Revenue (NBR) levied advance income tax at the rate of 6 percent three years ago on PDB’s bulk power sales despite being a loss-making company. Although the power department sent several letters to cancel it, it was not implemented. Besides, the burden of capacity charge is increasing every year due to new generation of power plants. Besides, electricity import bills from India have to be paid in dollars. Electricity import from India has increased due to the addition of Adani. As a result, the expenditure in this sector has also increased a lot.
Analyzing the last 15 years financial report of PDB, it can be seen that from 2008-09 to 2022-23 financial year, PDB has calculated a loss of Tk 1 lakh 60 thousand 963 crore 45 lakh. However, in the last two financial years, PDB has made a loss of Tk 84,19 crore. That is, 52.30 percent of PDB’s losses in 15 years were in 2021-22 and 2022-23 financial years. And when compared to the financial year 2008-09, the loss of the financial year 2022-23 has increased by almost 61 times of PDB.