On January 29, the Bangladesh Energy Regulatory Commission (Amendment) Bill 2023 was passed in the parliament, paving the way for the government to adjust the prices of gas and electricity without a public hearing.

State Minister for Power, Energy, and Mineral Resources Nasrul Hamid moved the Bill in the House which was unanimously passed by voice votes with Jatiya Sangsad Speaker Dr Shirin Sharmin Chaudhury in the chair.

While placing the bill, the state minister said the proposed law will be enacted by amending the Bangladesh Energy Regulatory Commission Act 2003. "Now the system loss in electricity generation is not more than 6-7 percent declining from the earlier level of 41 percent," he added.

Terming the act as a black law, Gano Forum lawmaker of Sylhet-2 constituency Mokabbir Khan said the government has undoubtedly increased the distribution of electricity, but there was also extensive corruption taking place in the sector. He urged the government to withdraw the bill as it would further raise the unit price of power.

Jatiya Party lawmakers - Fakhrul Imam of Mymensingh-8 and Rawshan Ara Mannan of reserved women seat-47, also discussed the merits and demerits of the bill.

Earlier, President Md Abdul Hamid promulgated the ordinance on December 1 amending the Bangladesh Energy Regulatory Commission Act 2003, as the Parliament was not in session at that time. The Law Ministry issued a gazette on the same day announcing the amendment that allowed the government to adjust the prices of gas and electricity.

That came after the Cabinet on November 28 approved an amendment to the BERC Ordinance 2022 to empower the government to set fuel tariff on its own "under special circumstances" without waiting for the commission's public hearing and decision.

Previously, the Ministry of Power, Energy, and Mineral Resources used to adjust the prices of fuel, including diesel, octane, kerosene, and petrol, without any public hearings, whereas BERC adjusted the prices of gas and electricity after public hearings.

The BERC is an autonomous body established based on the Bangladesh Energy Regulatory Commission Act 2003, aiming at improving power and energy infrastructure in Bangladesh. The law has previously been amended three times.

The very next day after the BERC Act was amended, on January 30th, the government increased the electricity price by 5 percent at the retail level - the second hike in 19 days. At the time, Nasrul Hamid said from now on, the government will adjust the electricity price every month - contradicting the amendment that allowed for the adjustments under special circumstances.

This week, the government hiked the electricity price again, by 5 percent, the third such hike this year. The weighted average price of electricity will be Tk 8.25 per kilowatt hour, up from Tk 7.86. Before January, it was Tk 7.13.

Spiralling input costs

Meanwhile on January 18, the government raised the retail gas prices for public, private and captive power plants and also for industries and commercial users with effect from February 1. As per the new government announcement, the gas prices were increased by almost three times for public and private power plants while almost double for captive power plants and industries, and significantly hiked for commercial users. However, prices for household consumers, CNG-run for motor vehicles and tea estates were kept unchanged.

As per the gazette notification, the public and private power plants including the IPP and rental power plants will pay gas price at Tk 14 per unit (each cubic metre) instead of previous price of Tk 5.02. The rise is 179 percent.

The captive power plants, small power plants and commercial power plants will pay Tk 30 per unit instead of the previous price of Tk 16 which is an 88 percent rise.

It means after the current enhancement in gas price, the loss in the space of one fiscal will go up by over Tk 24,000 crore, said the sources at the Bangladesh Power Development Board - an almost 80 per cent jump.

According to BPDB's own latest estimates, the financial loss was supposed to cross Tk 48,000 crore in the 2022-23 fiscal from Tk 29,915 crore in the fiscal year 2021-22. But after the hike in bulk power tariff, the loss was calculated to come down by about Tk 4000 to Tk 44,000 crore.

"But now the loss will go up by Tk 10,000 crore due to the gas price hike effective from February 1," said the official referring to their latest calculation.

The directorate of finance of BPDB prepared this calculation on the basis of an audited report, official sources said.

The financial loss of the state-owned BPDB is likely to cross Tk 54,000 crore in the current fiscal year after the hike in the price of gas increased their input cost. In 2021-22 its losses were Tk 29,915 crore.

"We have to count Tk 10,000 crore extra cost to pay the gas bills following the new gas price enhancement," a top official of the BPDB told our sister newsagency UNB.

As per the calculation, the loss has shot up excessively mainly for the two reasons - primary fuel price escalation and devaluation of the local currency.

"Among the two, the devaluation of local currency emerged as the major reason," a top official of the BPDB told UNB.

He informed that the BPDB was going to incur a loss of about Tk 10,000 crore solely due to the high rate of dollar. Earlier, the US dollar exchange rate was calculated at Tk 85 which is now at Tk 107 which means the cost increased by Tk 22 per dollar.

The BPDB has to pay about $9 billion annually to buy electricity from private sector plants, to pay capacity charges and also to import other materials from abroad for its own purposes.

The BPDB has a power purchase agreement with a huge number of private power generation companies to buy their electricity.

Available statistics reveal, currently, the country's installed power generation capacity is over 25,500 MW and more than 50 per cent of electricity is generated by the private sector through independent power producers, rental and quick rental power plants.

As of January 2022, over 51 percent of the total installed capacity was generated by natural gas, followed by furnace oil (27.5 percent), and then coal (8 percent). The percentage generated by coal has been rising.

Coal: Cheap no more

We are thus presented with a situation where the government is increasing the price of the inputs, in the form of the gas price, and then increasing the electricity tariffs for consumers. On top of that, the government is also buying electricity from the coal-fired power plants at a higher price than earlier estimated, and passing on the cost to consumers.

The cost of power generation at the 1,320MW Rampal Power Plant is now estimated to be Tk 14-15 per unit, instead of Tk 7-8 per unit estimated when the project was taken up.

"The recent hike in coal prices in the global market has pushed up the generation cost. If the coal prices decline, the generation cost will come down rationally," said Subhash Chandra Pandey, the project director of the Bangladesh-India Friendship Power Company Ltd (BIFPCL).

The BIFPCL, a joint venture of Indian state-owned NTPC and Bangladesh Power Development Board (BPDB), is the owner and operator of the Rampal power plant.

"The coal price was almost half [of the current price] when the power generation cost of Rampal was calculated at the time of implementation agreement," a BPDB official told UNB, on condition of anonymity.

This seems to be a common problem for BPDB, which doesn't seem to recognise the inherent volatility of international energy markets when making big decisions or entering into agreements.

Unit-1 of the Rampal coal-fired plant resumed production last week after a month-long shutdown caused by coal shortage. The plant is still under a test run that started in August.

Though the plant has resumed its partial production, officials still worry about its uninterrupted operation due to the dollar crisis that may again disrupt the import of coal.

The government has formed a review committee, headed by Power Secretary Habibur Rahman, to analyse the existing deals signed by the public, private and joint venture power companies to import coal for use in power generation.

The 9-member high-powered committee held its first meeting on February 20, a top official of the Power Division told UNB in exchange for anonymity, since he isn't authorised to disclose it to the media.

Besides the Power Secretary, the committee also includes the Chairman of Bangladesh Power Development Board (BPDB), additional secretary of Power Division (coordination), representatives from the Prime Minister's Office, Finance Ministry, and Commerce Ministry; the chief engineer (power generation) of BPDB, managing directors of the power generation companies, and the deputy secretary (development) of the Power Division, who will also act as member secretary of the committee.

Official sources said the review committee was formed following the report that Bangladesh will incur a financial loss of Tk 700 crore per month and Tk 8,400 crore annually due to the "faulty deal" signed with Adani Power to import electricity from its coal-fired 1600 MW Godda plant in Jharkhand state of India, first reported by UNB in January. Electricity import from the plant is expected to commence in March.

Nasrul Hamid said Bangladesh will get the electricity from the India Company at competitive market price, adding, "There is no doubt about this. 750 MW power will come from the first unit in March. Another 750 MW of power will come from the second unit of Adani's power in April."

"There is nothing to worry about the electricity supply during the coming irrigation season. Several coal based power plants will come into production soon," he said.

Adani Power recently sent a request for BPDB to issue the demand note, where the coal price is quoted at $400 per metric ton - far above what BPDB officials believe it should be given the present state of the international market.

"In our view, the coal price they have quoted ($400/MT) is excessive - it should be less than $250/MT, which is what we are paying for the imported coal at our other thermal power plants," the BPDB official said.

The BPDB sent a letter to the Adani Group seeking a revision to the existing PPA following the request it received in relation to opening LCs (in India) to import the coal that will be used as fuel for the 1,600 MW plant in Jharkhand.

A 5-member team from the Adani Group came to Dhaka last week and held a meeting with the BPDB top officials to resolve the issues on "coal pricing mechanism of the power purchase agreement (PPA)".

A chief executive and a chief procurement officer of Adani were among the 5-member delegation while one official from Adani's Dhaka office also joined the meeting that lasted more than an hour, sources at BPDB said.

A number of BPDB officials including the member (company affairs) and the member (finance) were present at the meeting. The issues discussed at the meeting were kept secret citing sensitivity on both sides.

Bangladesh sources said both the sides heard each other and presented their respective points. But both sides expressed interest to continue discussion, said the sources, adding that Adani's representative informed them that they would communicate BPDB's stance on the coal pricing mechanism of the PPA to their top management and they will sit in more follow-up meetings.

"Adani officials are convinced with the BPDB's points on the issue," said the official preferring anonymity. "We're hopeful that Adani will finally accept Bangladesh's request for revising the PPA to set a new coal pricing mechanism."

Following the meeting, the Adani team also met the BPDB chairman and Power Secretary Habibur Rahman separately. BPDB officials said now the top policymakers of the government will take the final decision on the matter of "amending/adjusting coal pricing mechanism of the PPA". They also said that they are hopeful of receiving electricity from Adani's 1600 MW Godda Coal-fired Power plant in Jharkhand state from anytime in March.

Govt remains defiant

In the wake of the latest hike, Information and Broadcasting Minister Hasan Mahmud said that despite the latest rise in power tariff, the price of the electricity in the country is still lesser than many other nations across the world.

"The price hike of electricity in the UK exceeded 100% long ago. This hike is 20 percent to 100 percent in other European Union countries as well. Compared to that, the increase in electricity price hike is much less in our country", said the minister while exchanging views with journalists at the Secretariat.

Mentioning that electricity in Bangladesh is even less costlier than neighbouring country India, the minister said that price of each unit of electricity in Bangladesh is 7 taka 32 paisa while it is Tk 11.15 in New Delhi, Tk 11.33 in Maharashtra, Tk 8.63 in Punjab.

He said the price of each unit of electricity is Tk 18.31 in the US, Tk 41.93 in Germany, Tk 46.46 in Belgium, and Tk 25.74 paisa in Japan.

This simplistic measure however fails to take into account the differences in purchasing power among the different countries, and the general price level in the different economies, on which the affordability of power would depend.