Frequent Power Cut Is Back

Frequent power cut is back As high oil prices ransack Subsidy reserved for electricity. Govt takes road to austerity.

Govt has recently decided to forbid all lighting decorations of key public and private installations . The decision complements earlier decision of obligatory closure of all shops after 8 p.m. Working hour cut is also on the table. This is an indication how soaring oil and gas prices in the international market make a dent in the govt pockets. Any price hike of fuel and gas in international market will increase the cost on subsidy and energy price, which will have a domino effect on everything.

Already across the country frequent power cut is back,invoking memories of bygone era. But government is not willing to allocate more subsidy to power generation. So loadshedding is the only solution.

In 2012-13,govt provided a total subsidy of TK 427.616 billion and oil subsidy accounts TK 135.58 billion. For three consecutive years,no subsidy was provided to Bangladesh Petroleum Corporation (BPC) as oil prices in international market were lower.Last year, govt provided a total of TK 530 billion subsidy on oil and energy¹. Of this,TK 280 billion was spent in the power sector, while TK 250 billion was spent on import of LNG. This year govt allotted a total subsidy of TK 840 billion and TK 160 billion was allotted to fertilizer production. Spike in LNG prices and rapid fall of Taka against US dollar augments the subsidy spending many folds. The current situation calls for a BPC subsidy of $2 billion².To deal with the issue,government has concentrated on fertilizer production as ensuring food security is getting top priority when a famine-like situation looms large. Meanwhile, more gas for fertilizer amid LNG supply shortage means less gas for power generation. Inflation battered people are not ready for paying more. Govt decided to reduce consumption during this summer and Monsoon time when demand for electricity is higher than any other time of the year. And the result is more loadshedding. The decision is also coincided with a moment when the country's current account deficit reached $15 billion,a record for the country,and a sharp drop in remittances which worked as cushion against widening trade deficit. And from July 12, govt is about to start negotiations with IMF for a credit of $4.5 billion as budget assistance. Time is ripe for taking measures of austerity. Govt hopes that by September situation will improve and its drastic measures may reduce electricity consumption by 2000 MW. I personally think people are in no mood for paying more prices for electricity and gas.Loadshedding at measured intervals for the moment is the only viable solution.

But what the govt is doing with this saved resources is no less important matter.Ahead of election year,we see that the govt is in spending mood. Signs are there. For instance, govt is mulling building culverts in part of the embankment cut by villagers to let the flood water go. If it continues to throw the money into gutters without ensuring any checks and balances then there is no meaning of this austerity.

Notes And References:

1. Bangladesh Economic Review 2019
2. “Govt Mulls Short Work Hours,Work From Home To Contain Energy Crisis”,Eyamin Sajid,Business Standard,July 07,2022. For more read at https://www.tbsnews.net/bangladesh/energy/govt-mulls-short-work-hours-work-home-contain-energy-crisis-455182