The government is contemplating power tariff hike at both retail and wholesale levels by Tk 0.30 to Tk 0.35 subject to approval by BERC, a junior minister said.
“We’ll increase power tariff by Tk 0.30 to Tk 0.35. And such a hike won’t be required if duty and VAT on diesel-fired power plants are waived,” State Minister for Power, Energy and Mineral Resources Nasrul Hamid said.
He was talking to reporters at an informal briefing at his office at the Secretariat on Wednesday.
But the fate of power price hike at the moment largely depends on the waiver of tax and VAT on diesel-fired electivity plants.
Sources said withdrawal of duty and VAT worth Tk 3,007 crore on diesel import for power plants to stabilise the power tariff before the upcoming general election is under active consideration of the governemnt.
Bangladesh Power Development Board (BPDB) earlier sent a proposal to the authorities for duty and VAT waiver.
Public hearing on power price hike will be held on September 25.
BPDB sources 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’ll help reduce the electricity generation cost by nine US cents per unit,” BPDB Chairman Khaled Mahmood told daily sun on August 23.
The proposal noted that the government is implementing oil-fired plants under short, midium and long-term plans to further reduce the dependence on gas-fired plants amid a shortfall in gas supply.
Currently, around 2080MW of electricity is generated using diesel.
BPDB procures around 16 lakh tonnes of diesel a year for generating 1,570MW of 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. BPDB 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. BPDB’s proposal also said the waiver will help cut power subsidy.
Earlier, Nasrul Hamid 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The government has already withdrawn duty and VAT on furnace oil import for power plants.
However, BPDB 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, BPDB managed to reduce electricity generation cost from public sector furnace oil-fired plants taking advantage of the waiver.
BPDB 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.
Bangladesh Energy Regulatory Commission (BERC) will start on September 25 seven-day public hearing on proposals submitted by six state-owned electricity agencies and distribution companies to fix new bulk and retail power tariffs.
The hearing will be held at TCB Bhaban in the city’s Karwan Bazar.