The government has drawn up a plan to increase the price of electricity four times a year for the next three years to withdraw all subsidies in the power sector, which the IMF recommends.
The plan was placed before a meeting between the visiting International Monetary Fund (IMF) mission and officials of the power and energy division yesterday.
The power price would be hiked in small amounts so that the consumers do not get a shock, power division officials told, adding that subsidy on gas would also be withdrawn gradually.
According to the officials, the IMF mission, led by Chris Papageorgiou, wanted to know the outstanding bills of the Independent Power Plants and how much had they been paid in bonds.
Meanwhile, the Consumers Association of Bangladesh (CAB) yesterday alleged that the government was hiking power and fuel prices to protect the interests of dishonest businesspeople.
It said the sector would not need subsidies had the government stopped irregularities and corruption.
CAB made13 recommendations, including a ban on non-competitive investments, so that the government does not have to raise the price.
The IMF mission arrived in Dhaka on April 23 for its second review of the $4.7 billion loan programme. The third tranche of the loan would be released following the review.
During meetings with finance ministry officials earlier, the IMF team asked the government to gradually reduce subsidies for power, gas, and fertiliser.
After entering into the IMF’s $4.7 billion loan programme in January last year, the government hiked the prices of electricity and gas several times.
After 2022-23 fiscal year, the government subsidies for electricity, gas and fertiliser nearly doubled.
In the current fiscal year, the subsidy allocation is Tk 84,542 crore and the figure could be about the same in next year’s budget.
The subsidy for power is around Tk 35,000 crore and around Tk 6,500 crore for gas this fiscal year.
The finance division this fiscal year paid the power division around Tk 19,000 in bonds and cash but unpaid bills amount to around Tk 60,000 as of last January, officials said.
A power division high officials said despite the hikes in electricity prices, Tk 7 to Tk 8 has to be subsidised for every unit of power produced.
“This is the main reason for the piling up of unpaid bills,” the official said, adding that this time the IMF mission wanted to know the plan for reducing the arrears and subsidy burden.
The official said the government would withdraw the subsidies for the power and energy sector as it had done for petroleum fuels.
The IMF mission also wanted to know whether the Rooppur Nuclear Power Plant would require any subsidy.
“We told them that the per unit generation cost for the Rooppur plant would be low and would not need any subsidy,” the official said.
Power division officials said the first unit of the 2,400-megawatt Rooppur plant would start production next March.
The IMF has been insisting on reducing the subsidy for the power and energy sector and diverting the money saved to the social safety net programmes.
The IMF mission will end its tour with joint meetings with finance division and Bangladesh Bank officials on May 6 and 7, according to finance division officials.
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The Daily Star