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More subsidy to encourage wastage of fund: CPD

The capacity payment obligation for private power plants forced the govt to increase power tariff, the think tank observes

  • Staff Correspondent
  • 27 June, 2022 12:00 AM
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More subsidy to encourage wastage of fund: CPD

Although energy subsidy is required to contain inflation, the rising subsidy may encourage the wastage of public money, said Centre for Policy Dialogue (CPD).

“Power subsidy in terms of optimum of public resource is not good for the economy as it, sometimes, encourages wastage of money,” CPD Executive Director Dr Fahmida Khatun remarked.

The government has set aside Tk 170 billion as energy subsidy for FY2022-23 against Tk 120 billion revised subsidy allocation in outgoing FY2021-22, the think-tank informed at a post-budget dialogue on power and energy sector on Sunday in Dhaka. 

CPD said the capacity payment obligation for private power plants forced the government to increase power tariff.

CPD research director Dr Khondaker Golam Moazzem made a presentation on the issue.

He showed that the capacity payment to private sector power plants, including rental and quick rental plants, went up to Tk 265.05 billion in FY2021-22 from Tk 56 billion in FY2017-18.

According to the CPD, the amount of capacity payment could reach Tk 316 billion in FY2022-23.

Energy sector expert Dr Shamsul Alam said the government is giving huge benefits to the private sector power producers through “predatory cost” which plays a major role in increasing power tariff.

He alleged that the government is paying Tk 92 per litre of furnace oil for power generation at private plants while the state-owned Bangladesh Power Development Board (BPDB) is costing this furnace oil at Tk 72 for its own plant.

He said 95 percent of furnace oil-based power plants are being operated by the private sector and in this way the government is paying Tk 8,100 crore to the private power plant operators.

Dr. Shamsul Alam said the power sector had been a good source of looting state resources.

Without preventing this theft, the crisis in the power and energy sector would not be resolved, he remarked.

Dr Moazzem said that the country’s surplus electricity which was termed as the over generation capacity of electricity increased to 10,764 MW in FY2021-22 from 8231 MW in FY2020-21.

The amount jumped to 42.12 per cent from 37.37 per cent. The current total electricity generation is 25,556 MW.

He observed that the government’s access to electricity target had been achieved, but people were not getting the full benefits because of the lack of transmission and distribution facilities.

He said the budgetary allocation for the FY2022-23 also showed that the two segments of electricity were not receiving the due attention from the government as the generation segment was dominating the allocation.

Power Cell director general Mohammad Hossain, however, disagreed with the figures about over generation capacity.

He said, “It is not logical to show the capacity payment separately as such cost is calculated as production cost.”

Energy expert Dr M Tamim said the country aggressively needs to pay attention to the development of the primary energy sector.

“But there is no such initiative from Petrobangla to move for local gas exploration,” he said, blaming a leadership crisis in the organisation for the situation.

He said, “It is not clear why Petrobagla failed to prevent the fall in production at its existing gas fields while the foreign company Chevron successfully kept its production at higher level at its Bibiyana field.”

“This might be that the government is emphasising meeting the

gas shortage through imports,” M Tamim said.

He observed that the Titas Gas’s system loss was 7 per cent which meant 150 million cubic feet per day (MMCFD) of gas was being stolen daily while the country has to import a huge amount of gas.

Dr Badrul Imam said the government had no success story in the energy sector although the energy was the primary supplier of fuel to the power sector.

He said the gas production was decreasing day by day and the stock would be fully depleted within the next few years.

“But no initiative is visible from the government to drill new gas wells for exploration,” he alleged, saying that in the last 26 years, only 26 wells were drilled.

“But there are huge prospects of gas and oil resources in the country as it is the biggest delta in the world.”

Most of the oil and gas reserves were discovered in the deltas in the world, Dr Imam added, saying the US Geological Survey study shows the country has a prospect of 42 trillion gas reserves.

He said the government has to annually spend Tk 44,000 crore to import gas to meet the local demand.

Dr Shamsul Alam said the government was giving huge benefits to the private sector power producers through “predatory cost” which played a major role in increasing power tariff.

President of the Bangladesh Independent Power Producers Association (BIPPA) Imran Karim said the country’s actual power generation capacity is 16,000 MW while the daily production is 13,500 MW as many plants are not being operated due to the gas crisis.

Defending the private sector’s role in power generation, he said electricity generation cost would be lesser if furnace oil was used for power generation instead of imported LNG as the price of furnace oil decreased in recent days.

Former chairman of Bangladesh Atomic Energy Commission Shafiqul Islam, Prof Dr Kader and noted social activist Khushi Kabir, among others, also addressed the dialogue.