Electric shock for consumers now!

Consumers – already grappling with soaring costs of living because of recent price hike of fuel oil, high inflation, and devaluation of the local currency – are poised to take another blow as the technical committee of the Bangladesh Energy Regulatory Commission (Berc) has recommended raising retail electricity price by over 15% to Tk8.23 a unit.

Berc Chairman Md Abdul Jalil, however, has hinted that the retail tariff might be higher than what the technical committee has recommended if the government stops providing subsidies on electricity.

The Berc technical committee made the tariff hike proposal on Sunday after a public hearing on the six state-owned power distribution entities' proposal to raise the power tariff at the retail level by 20% on average following a bulk electricity price hike in November last. 

Any electricity tariff hike at the retail level, no matter lesser or higher than the technical committee's recommended range, will severely impact agricultural production, and fuel further upsurge in commodity prices and living costs, warned economists and energy experts. 

Infographic: TBS

Rice production, especially ahead of the Boro paddy season that depends heavily on electricity for irrigation, would be a tough challenge for farmers who are already reeling under the impact of record inflation. 

The RMG and apparel sector – the highest source of foreign currency earnings for the country – fears losing competitiveness in the international market, something already affected because of the gas price hike last June.

A five-member Berc panel that included Chairman Md Abdul Jalil heard the arguments of the electricity distributors and suppliers.

At present, the per unit retail electricity price is Tk7.02.

On 21 November last, Berc announced hiking the bulk electricity tariff by 19.92% to Tk6.20 kWh (kilowatt-hour), which took effect in December. 

Following the bulk tariff hike, power distribution companies and the lone transmission company appealed before the regulatory commission to adjust the retail tariff with the bulk one and to increase their distribution and transmission charges.

During the public hearing on Sunday, the officials of the distribution companies presented their revenue requirement and proposed passing through the full adjustment of the bulk hike to the retail level and to increase the distribution charges by average 42.73% while Power Grid Company of Bangladesh Limited proposed to increase the transmission charge by 118.51%. 

After analysing the proposals, the Berc technical committee, however, recommended a retail electricity tariff hike of 15.43%. 

With this price hike, the distribution companies will earn additional Tk8,000 crore from consumers in fiscal 2022-2023, said the technical committee. 

It also recommended increasing the distribution charge by 3% on average and the transmission charge by 13.19%. 

Opposing the power distribution companies' proposal and the technical committee's recommendation, Professor M Shamsul Alam, energy adviser to the Consumers' Association of Bangladesh said the revenue that the companies intended to raise by hiking retail tariff at consumers' level could be managed with internal cost adjustments. 

"Amid this unprecedented inflation and wage gap, required revenue of the distribution companies could be managed without hurting the consumers at micro and macro level of economy," he said. 

"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 need to increase their distribution charges," he added.

Infographic: TBS

Berc Chairman Abdul Jalil yesterday said that the commission will announce the retail price hike by 30 January after analysing all the recommendations made during the public hearing.

During the public hearing,  Dhaka Mass Transit Company Limited ( DMTC) and Bangladesh Hi-Tech Part Authority requested the regulatory commission to direct the distribution companies to supply electricity to the Dhaka metro rail and the hi-tech parks at a subsidised rate. 

But, the Berc chairman told them there is know special provision to supply electricity to a specific consumer at a subsidies rate. 

He, however, suggested the two agencies get the recommendations from the ministry concerned for the special facilities. 

Apprehension of losing export competitiveness 

The export-oriented apparel industry fears that the proposed hike in the retail electricity tariff will increase their manufacturing costs, affecting their competitiveness in the international market.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that none of the industries has the capacity to bear this additional cost in the current situation. 

The apparel industry is already under immense pressure as its global demand is falling due to the Russia-Ukraine war-induced inflation, he mentioned, adding that a number of apparel exporters have already failed to pay their electricity bills and in some cases factory owners are facing legal woes due to non-payment of their electricity bills. 

If the recommended price takes effect, a large number of factories will face difficulties to continue productions, he added. 

The BKMEA leader also alleged that they are also paying for diesel to run captive generators as there is not adequate supply of quality electricity. 

Hatem also said that although fuel prices are going down in the international market, local industries are not getting any benefits from that.

Paddy production to get costlier

Some 15 lakh irrigation pumps of different types are used during Boro season that contribute more than 50% of the country's total paddy production, 25% of which are electric, according to sector insiders. 

Hence, if the price of electricity increases, the cost of irrigation will increase greatly, they added.

Agricultural economist Dr Jahangir Alam Khan told TBS, "Boro season depends on various inputs, and irrigation was a prominent one among them. Before this, the price of fuel oil was increased. Now if electricity gets costlier, the increased irrigation costs might discourage farmers to cultivate crops, while we are talking about bringing fallow land under cultivation."

He also suggested that even if the power price is adjusted eventually, the government must pay back the increased costs of production they will bear because of the hikes power and fuel prices as cash assistance if we want good yield during the Boro season

Md Shafiul Ather Taslim, director (finance and operation) of TK Group of Industries, told TBS, "We are still going through a gas crisis.

Due to this, production is getting hit. Besides, there is the effect of the Russia-Ukraine war. And a hike in the electricity price will only add to our suffering, and pressure will mount on consumers."
 
Cost of living, essentials prices to escalate  

Due to the recent hikes in prices of liquid fuel and gas, and the devaluation of local currency against the US dollar, the average inflation for the past year rose significantly to 7.70% – the highest annual average in the past 11 years.

Amid this record inflation, low-income and middle-income people are struggling to manage the cost of living irrespective of urban and rural areas.

The recommended retail electricity price will make the struggle more difficult for these people, said economists and wage experts.

The latest data of the Bangladesh Bureau of Statistics show that wage growth in December was much lower than the inflation rate.

According to a report released by the bureau on 2 January, wages in December saw a 7.03% growth, up from 6.98% in the previous month. However, despite the nominal wage increase month-on-month in December, the wage growth rate was still 1.68 percentage points lower than the inflation rate.

The figures justify the call for raising wages as an economic think tank revealed that an average worker at the apparel industry, which led the record-breaking monthly export in December, earns less than half the amount needed in a month for a decent living.

To combat high inflation Dr Mustafa K Mujery, former director general of the Bangladesh Institute of Development Studies (BIDS), recommended strong policy measures from the government, including market monitoring, food support for the poor, as well as long-term initiatives to increase productivity and stabilise the market through wage increases.

The Bangladesh Garments Workers Unity Council is calling for a minimum monthly salary hike for garment workers to Tk22,000 (of which, 65% will have to be the basic pay) from the current Tk8,000.

The demand comes in response to rising prices of daily essentials, cost of living, and house rent, according to the unity council Chairman Md Towhidur Rahman.