Bulk power tariff hikes push Desco into losses

The listed power distributor Dhaka Electric Supply Company (Desco) incurred a loss in the October-December quarter of the current fiscal year as it had to purchase bulk power at higher rates, although its retail price remained the same.

Officials at the state-owned company have attributed the loss to administrative and other expenses, finance costs, fluctuations in currency exchange rates and bulk electricity price hikes.

The distributor posted a Tk3.77 crore loss in the three-month period compared to a Tk15.38 crore profit in the same period of the last fiscal year, according to its stock exchange disclosure on Monday.

Desco registered higher revenue from domestic, industrial, and commercial level customers as consumption and users in these categories increased gradually during this time, but it was nearly not enough to offset the waning profits caused by other factors.

This is not the first such loss for the company. Earlier, it incurred losses in the January-March quarters of 2020, 2016, and 2017.

The state-owned electricity distributor's revenue increased by 9.33% year-on-year to Tk1,203.81 crore during the October-December period in FY23.

The Bangladesh Energy Regulatory Commission raised the bulk electricity price by 19.92% effective 1 December last year.

Six state-owned power distributor companies, including Desco, have recommended raising the retail power tariff by about 20% in order to maintain profits in this situation.

The technical evaluation committee of the Berc has already recommended raising the retail electricity price by 15.43%.

Md Mominul Islam, Desco's general manager (Finance and Accounts), commented on the loss, saying, "We are buying bulk electricity from the Bangladesh Power Development Board at a higher price, but we did not raise our consumer prices. This has choked our profits."

"Once the government increases the price of retail electricity, we will be able to get out of the circle of losses," he added.

Desco supplies electricity to most parts of the Dhaka North City Corporation. The distributor has approximately 10.53 lakh customers.

Among them, around 91% of users are from the domestic level, 7% are from commercial and industrial levels, and other consumers make up the remaining 2%.

In the first half of FY23, Desco's energy sales revenue increased by 11% to Tk2,656 crore and the net profit decreased by 64% to Tk7.73 crore.

Desco shares have been stuck on the floor at Tk36.60 each since September last year at the Dhaka Stock Exchange.