POWER tariff hike — two to three times a year is putting adverse impact on export earning and by and large new investment to accelerate the country’s economic growth. The government is doing it to minimize loss but a highly wasteful power sector is causing more damage to the nation than supplying electricity at higher cost.
As per a national daily, Japan International Cooperation Agency (JICA) called for slow rise in power tariffs not exceeding 2.6 percent annually as unusual higher rates will have huge negative impact on growth. JICA’s opinion came at a time when the government has increased power tariff by more than 11 percent annually from 2010 and 2015. We all know that power tariff hike leads to cumulative rise in production cost and inflation. This in turn disturbs economic development. So the government should realize the negative effect of higher power tariff and put restraint on further increase in electricity price.
The JICA report pointed out that a 10 percent rise in annual electricity tariff would cut Bangladesh’s Gross Domestic Product (GDP) by 0.72 percent or US$ 810 million calculated on the basis of 2014-15 economic data. It further shows a 10 percent annual increase in electricity tariff would cut exports by $79.3 million and imports by $94.7 million. From 2010 to 2015, increased power tariff helped the government to reduce spending on power sector subsidy by Tk 1,500 crore. But the annual GDP growth loss was four times higher than saving.
JICA has rightly suggested electricity prices to rise at moderate rates so its adverse effect on growth at low level. It also called for supplying electricity at break-even costs by 2041 when the demand for electricity would rise to 50,400MW. Keeping 2041 in the mind, JICA report said the best option for Bangladesh would be to get 35 percent of its electricity from gas-fired plants and another 35 percent from coal-fired plants. The remaining 30 percent may come from nuclear power, plants using fuel oils and renewable energy sources.
JICA is right when it said keeping power tariff rise at 2.6 percent annually will help higher domestic consumptions to grow until 2031 when the economy will be expanding rapidly. Care should be taken therefore that higher cost of electricity should not be leave negative effect on such growth.
We believe that the government would take practical step in the light of JICA report to produce more power at lower cost to keep the electricity price lower at consumers level to support higher growth. Power sector needs strategic plan to outweigh the impact of higher cost of power generation with demand for low cost electricity for higher growth.
