People pay for power but how much

The parliamentary standing committee on power, energy and mineral resources ministry has recommended a further hike in power and gas prices.

All of the committee members are people’s representatives and so it could be assumed that their recommendation is in the interests of the people.

Yet their recommendation needs to be analysed. The parliamentary panel has used statistics to show that the government sells electricity at a price less than the production cost, so the government is to provide subsidy to the sector.

The subsidy cannot continue for long as it may lead to a collapse of the economy, thus the price hike.

This statement by the parliamentary panel is only partially true. The fact is, the government sells electricity at a low price to the distribution companies, not to the people.

The people buy electricity at a rate higher than the production costs.

Furthermore, there is discrepancy in the information provided by the parliamentary panel and that of the power development board (PDB).

The parliamentary panel said the per unit production cost of electricity is Tk 6.68 while the government is selling it at Tk 4.71 (to the power distribution companies).

According to the latest statistics of the PDB, the per unit production cost is now Tk 6.24 and the government is selling at a rate of Tk 4.47 to the power distribution companies. With the latest price hike of electricity, the government would henceforth get Tk 4.90 per unit from the distribution companies.

Now the question is: how much will the people pay for electricity?

Until last Thursday, the day when the electricity price was raised once again, a common consumer needed to pay Tk 6.15. The energy regulatory commission (BRC) increased the per unit price by Tk 0.18. So from September, per unit average price of power for the consumer will be Tk 6.33, that is more than the present production cost of Tk 6.24.

The government sells electricity to the distribution companies at a price lower than production costs. The people buy the electricity from the companies at a price higher than the production costs. The government is getting this price. Is the solution simply a price-hike, as the parliamentary committee suggests?

Not at all.

The biggest opportunity that has arisen is the slump in international market fuel prices. If the government adjusted prices accordingly, the per unit production cost of electricity would be about Tk 5.50. But the government will keep the fuel prices high and will increase the electricity prices, not worried at all.

There is a general consensus on the increase in gas prices. The use of LP gas for domestic purposes costs over Tk 2000 a month. The government has thought of increasing pipeline gas prices and subsidising LP gas prices. If this is implemented, then the imbalance in payment among consumers would be resolved.