Consumers cornered as electricity price hiked again – twice in 20 days

Another bolt from the blue hit consumers after the government once again hiked the electricity prices by 5% at the retail level.

At a time when citizens are already feeling the heat from spiralling prices of commodities, the rise in electricity price – set to be effective from February – will hit where it hurts the most: quickly depleting wallets.

Less than three weeks ago, on 12 January, electricity prices had increased by 5%. The hike was retrospective in nature as it would apply for the entire month.

This time, however, the government has decided the new hike will come into effect in February, allowing consumers to know beforehand that they would have to adjust power consumption.

Following two hikes in less than a month, the average retail price has been increased from Tk7.13 to Tk7.85 per kilowatt hour (kWh) at the customer level, according to Monday's gazette issued by the Ministry of Power Energy and Mineral Resources.

The hike coincides with the International Monetary Fund's approval of a $4.7 billion loan sought by Bangladesh – both news reached the public at the same time..

The hike is believed to be part of reforms given by the IMF for the loan approval.

Pakistan, which has also sought IMF support, is also mulling an increase in energy prices to appease the money-lender.

This is the third time the Bangladesh government used its newly-granted authority to adjust the price of electricity without a public hearing by the Bangladesh Energy Regulatory Commission, an already contentious matter.

Distribution companies had applied for at least a 15.43% increase in retail/consumer-level electricity prices to cover their financial loss against the 20% price increase at the wholesale level.

Professor M Shamsul Alam, energy adviser to the Consumers' Association of Bangladesh, during the earlier hike in the first week of January, had said, "Amid this unprecedented inflation and the wage gap, required revenue of the distribution companies could be managed without hurting the consumers at micro and macro level of the economy.

"Desco is in a surplus revenue situation. If you look at the financial reports of other companies and their sources of income, you will find that none of the companies needs to increase their distribution charges."

Monday's ministry gazette also mentioned that the retail price of electricity will be adjusted every month.

Additional revenue for government

Bangladesh Power Development Board data says the total electricity consumption in the country was 76,667 million kWh in FY22. With a 7% approximate growth in demand, the consumption is expected to reach 82,033 million KwH in FY23.

Power Division officials estimate that if the new price will continue for a year, the government will bag an additional Tk5,849 crore in revenue. A big portion, Tk3,063 crore,  will come from household consumers – the largest group of electricity users, they said.

What businesses say

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruqe Hassan requested the government to defer the new electricity price as energy prices had been increased recently. "This utility price hike will create more inflationary pressure and increase bank interest rates as all are in a chain," he told The Business Standard. 

"Due to the additional cost, we will lose our competitiveness in global markets as the exporters have been facing the effects of the Russia-Ukraine war-driven slowdown in orders," Faruqe Hassan further said.

BGMEA Vice-President Shahidullah Azim said the government should not increase gas and electricity prices suddenly. "The utility price hikes will increase our production cost by 40%." 

He also added that the hikes will put a burden on public life. 

"Rising electricity prices at the consumer level will certainly put another strain on our production costs. The cost of living of our workforce will also increase. I don't know who will compensate for the extra bill," said Cute Dress Industries Ltd Managing Director Sheikh H M Mustafiz.

"For my factory MB Knit Fashion in Narayanganj, I paid some Tk4.3 crore in electricity bill last month. With the latest two hikes, I fear that the bill will cross Tk5 crore," said Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association.  

"In contrast, my business has been on a drastic fall. For example, the factory used to export knitwear items worth $1.8 billion which fell to $1 million last month due mainly to global slowdown," he told TBS. 

On 12 January, the government announced a 5% increase in electricity prices to Tk7.49 per kilowatt hour at the retail level. Earlier on 8 January, the technical evaluation committee of the energy regulatory commission recommended around 15% hike in retail electricity prices at a public hearing against power distribution companies' proposal to increase the price on an average by 20%.

Bangladesh Energy Regulatory Commission Chairman Md Abdul Jalil, at the event, had hinted that the retail tariff might be higher than what the technical committee recommended if the government stopped providing subsidies on electricity.

Meanwhile, the government hiked gas prices on 18 January this year by a staggering 179%, with an eye on eliminating subsidies and cutting the fiscal deficit. The massive hike left industry leaders and energy experts stunned just a few days after electricity prices increased.

The Energy and Mineral Resources Division said the current global energy situation amid the Russia-Ukraine war had resulted in volatility in all types of energy prices.

Farmers to be hit hard

The power price hike is going to be a double whammy for the farmers, which would soon be visible, experts believe. "We have some 15 lakh irrigation pumps of different types and some 25%  or nearly 3.75 lakh pumps are electricity-driven. As the price of electricity has increased, the cost of irrigation will increase accordingly," said Agricultural Economist Jahangir Alam.

"The [ongoing] Boro season is heavily dependent on different inputs, including irrigation. So, we will soon see the impacts. Farmers already burdened with field price hikes will again be hit hard," he told The Business Standard.   

The double whammy can force many growers to take up cultivation despite the campaign for bringing fallow land under cultivation and increasing agricultural production, he said and added additional cash support is needed for them to compensate for the energy price hikes. "Otherwise, our agricultural production, particularly rice production will significantly fall," he expressed fear. 

"We are still going through a gas crisis, which severely hampers our production. The adverse impacts of the Russia-Ukraine war are also in place," added Md Shafiul Ather Taslim, director of TK Group of Industries – a leading supplier of essential commodities. 

"If the hiked electricity price comes into effect, another round of hardship will begin, which will ultimately increase the burden on consumers, " he told TBS. 

Bulk electricity price hiked by 8.06%

Apart from the hike in retail, the Power Division also increased the bulk electricity prices by 8.06% on Monday to Tk6.70 per kilowatt hour.

Earlier on 21 November last year, the energy regulatory commission hiked bulk electricity price by 19.92% to Tk6.20 per kilowatt hour from the previous price of Tk5.17 kWh.

The latest bulk price will net additional Tk4,442 crores for the Bangladesh Power Development Board, officials said.