The government is likely to withdraw duty and VAT worth Tk 3,007 crore on diesel import for power plants in a bid to stabilise the power tariff eying the upcoming general election.
Bangladesh Power Development Board (PDB) has already sent a proposal to the authorities for the duty and VAT waiver, a top official has said.
The government does not want to raise the power tariff ahead of the election. Sources at PDB said the state-run agency will not require any subsidy if the duty and VAT on diesel import are lifted.
The duty and VAT waiver will reduce the diesel import cost to Tk 16,338 crore from Tk 19,345 crore a year.
“We have submitted a proposal to the Power Division to withdraw duty and VAT on diesel import. It will help reduce the electricity generation cost by nine US cents per unit,” BPDB Chairman Khaled Mahmood told daily sun.
The proposal noted that the government is implementing oil-fired plants under short, mid and long-terms plans to further reduce the dependence on gas-fired plants amid a shortfall in gas supply.
Currently, around 2080MW of electricity is being generated using diesel.
PDB procures around 16 lakh tonnes of diesel a year for generating 1,570MW electricity in public sector and another 510MW in private sector.
Another 400MW diesel-based plant in Sirajganj and several plants having the combined capacity to generate 800MW are also expected to commission in March 2018. PDB will require another nine lakh tonnes of diesel for the new oil-fired plants.
The government spent around Tk 4,200 crore for power subsidy last fiscal. PDB’s proposal also said the waiver will also help cut power subsidy.
State minister for Power and Energy Nasrul Hamid recently said the government has a plan to withdraw duty and VAT on diesel import to reduce the production cost at diesel-fired plants.
The government has already withdrawn duty and VAT on the import of furnace oil for power plants. However, PDB has been paying duty and VAT on the purchase of furnace oil for public sector plants until recently though the private sector plans have been enjoying the facility since 2011.
The discrimination was caused by lack of clarification in the SRO (statutory regulatory order) with regard to the duty and VAT waiver on furnace oil import. After the ambiguity was addressed in 2017, PDB managed to reduce electricity generation cost from public sector furnace oil-fired plants taking advantage of the waiver.
PDB currently spends Tk 738.1 million a day on fuel for state-owned plants to generate 9318MW of electricity. Of the total cost, Tk 657.1 million is spent on diesel and furnace oil and the rest Tk 81 million on gas and coal.