Desco suffers huge losses from bulk power price hikes

The profitability of the Dhaka Electric Supply Company Limited (Desco) has suffered a heavy blow from a hike in bulk prices at which the state-owned firm purchases electricity from the Bangladesh Power Development Board (BPDB).

In the January-March quarter, the publicly listed company incurred a staggering loss of Tk144.43 crore. However, in the previous two quarters, it posted a profit of Tk7.73 crore.

Despite this profit, it still incurred a loss of Tk136.69 crore in the first nine months of the current fiscal year.

Officials said that the cost of buying electricity has increased due to the increase in bulk prices last November. The state-owned company has plunged into losses as the retail price has not increased at the pace of the bulk price.

According to company sources, the bulk price of electricity was increased by 8% in January this year after the first increase of 20% in November last year.

After increasing the bulk price, the price has been increased by 15% in three phases at the retail level, of which 5% is expected to be effective with April's bills, which are supposed to be paid by this month.

Managing Director Md Kausar Ameer Ali believes that if this situation continues, the company's losses will increase further.

"The bulk price has been increased by 28% in two phases, but the price in retail or consumer level has not increased in that way. If the increase is at least 7% more than what has increased, the losses will come down," he added.

"The company has paid some dividend on the income it would have earned before the increase in the price of bulk electricity. Now the company is in big trouble."

According to the company's financial report, in the first nine months of the current fiscal year, its revenue increased with sales of electricity, but the cost of buying electricity was higher.

During the period, its electricity sales volume increased by 7.97% as consumption increased at the residential, industrial, and commercial levels.

During the July-March period of the fiscal 2022-23, the company spent Tk3,446 crore to buy electricity but sold it for Tk3,722 crore.

The total operating revenue of the company stood at Tk296.06 crore.

In the third quarter, it suffered an operating loss. In other words, selling electricity at a lower price than buying it has resulted in operating losses.

The company posted an operating loss of Tk49.32 crore in the January-March quarter. However, during the same period last year, the operating revenue was Tk148 crore.

The main objective of the Desco is to distribute electricity to its consumers effectively and efficiently.

Its operation started in 1998 in the Mirpur area, and as per government decision, the operation of the greater Gulshan area was added in 2003.

Further, in 2007, the operation area was also handed over from the Dhaka Electricity Supply Authority (DESA) to Desco.

In the fiscal 2021-22, it made a profit of Tk66 crore and paid a 10% cash dividend to its shareholders.