PDB faces Tk4,404cr subsidy spike due to taka devaluation: Sanem
A devaluation by Tk1 against the dollar in the fiscal year 2023-24 (FY24) could escalate subsidy payments by Tk473.6 crore, SANEM said, citing an assessment of the PDB
The devaluation of the taka against the US dollar will drive up the subsidy burden of the Bangladesh Power Development Board by more than Tk4,404 crore for the current fiscal year ending 30 June, said the South Asian Network on Economic Modeling (Sanem).
In a statement issued on Tuesday, the private think tank also voiced concern over reduced allocations for the power and energy sectors in the proposed budget for the fiscal 2024-25.
While making its observation regarding the FY25 budget for the power and energy sector, Sanem said Finance Minister AH Mahmood Ali's proposed budget of Tk7,97,000 crore allocates only 3.8% to this vital sector, down from 4.6% in the previous fiscal year – a 12.9% decrease.
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Quoting an assessment of the PDB, Sanem said a devaluation of Tk1 against the USD in FY24 could escalate subsidy payments by Tk473.6 crore. The one-year (FY24) devaluation from Tk107.7 per dollar to Tk117 is projected to increase the subsidy burden by Tk4,404.48 crore.
The think tank also says while the percentage of direct tax expenditure (tax exemption) for the energy sector is positive, the actual amount decreased to Tk7,611 crore from last year's Tk11,942.147 crore, indicating a lesser tax benefit for the sector.
Sanem said increasing electricity tariffs and insufficient funding for renewable energy are alarming factors for Bangladesh's energy security. It says the proposed budget allocates only Tk100 crore for renewable energy, which is insufficient given the government's renewable energy targets and diversification of energy sources.
It also pointed out the overcapacity in power generation. Sanem said despite having overcapacity, 27 new power plants are under construction, and building new LNG infrastructure is questioned due to volatile LNG prices.
Amid this situation, Sanem has recommended increasing budget allocation for renewable energy projects, managing currency devaluation impacts, addressing subsidy burdens efficiently, and reassessing the declining budget for the Energy and Mineral Resources Division.
