Energy sector pushed on back foot, power still in focus

The Energy Division has received a meagre portion of the total budgetary allocation for the power and energy sector, signalling a diminished government focus on gas exploration initiatives. Consequently, industries will have to rely more on imported energy.

Out of the total Tk30,317 crore allocation, the Energy Division received only Tk1,087 crore, with the bulk of the funds directed to the Power Division for building power plants and enhancing transmission and distribution lines.

Finance Minister Abul Hassan Mahmood Ali overlooked the appeals from entrepreneurs and experts for increased budgetary support for energy to meet the growing demands of the country's export-oriented industries. 

Insiders report these industries are operating at around 50% capacity due to insufficient gas supplies, which is adversely affecting the economy.

To stabilise the economy, which is currently grappling with dwindling foreign exchange reserves and the depreciation of the taka, businesses urged the government to ensure an uninterrupted supply of fuel to production-oriented industries at any cost.

M Tamim, an energy expert and professor of petroleum and mineral resources engineering at BUET, told The Business Standard, "Usually, on average, Tk25,000-26,000 crore was given to the Power Division in past years, whereas only Tk2,000-3,000 crore was given to the Energy Division."

He said, "Tk10,000-20,000 crore is really not a big amount to meet the needs of the Energy Division. It seems to me that at least Tk10,000 crore should have been allocated this year."

Bangladesh Knitwear Manufacturers and Exporters Association Executive President Mohammad Hatem told TBS, "Due to the gas shortage, knit mills have almost come to a standstill. The situation has taken a turn for the worse. If this continues, the knitting industry will be ruined."

He also demanded that the government raise allocations for the energy sector. 

In a statement on Wednesday, the Bangladesh Textile Mills Association said textile mills can use only 40-50% of their production capacity for the last few months due to the gas crisis.

According to Petrobangl, the country's 29 gas fields have total proven reserves of 28.79 trillion cubic feet (tcf). Of this, 20.33tcf was extracted until June 2023. Currently, gas reserves stand at 8.46tcf.

In contrast, the country's power generation capacity has now reached 30,277MW, including captive power and renewable energy, from 4,942MW over the past 15 years, official figures suggest. 

Additionally, 27 power plants with a total capacity of 9,144MW are under construction. 

The government now plans to expand power distribution lines to 24,000 circuit-km from the existing 15,246 circuit-km. 

Energy expert M Tamim said the government is advancing with a plan to hike electricity prices four times a year and withdraw all subsidies in the power sector over the next three years in line with an IMF prescription. 

"It will never be possible to rein in high inflation if this increase in electricity and energy prices continues. On the contrary, inflation may go up instead of going down," he noted. 

He further said, "In order to keep inflation under control and keep electricity prices within the purchasing power of people, the sector's subsidies must continue. Inflation is common when subsidies are withdrawn."

Meanwhile, finance ministry sources hinted that Tk40,00 crore has been earmarked as energy subsidies in the next fiscal year.