IMF team holds meeting with Power Division, discusses subsidy

The visiting team of the International Monetary Fund (IMF) yesterday discussed with the officials of the Power Division the issue of subsidies now being provided to the power sector, according to official sources.

According to the sources, the IMF team came to the Ministry of Power, Energy and Mineral Resources and discussed with the senior officials of the Power Division.

Senior Secretary Md Habibur Rahman led the Power Division in the meeting.

The team from the IMF, led by Rahul Anand, Mission Chief for Bangladesh, arrived in Dhaka on 4 October to discuss the terms of a $4.5 billion loan to Bangladesh.

The power sector has been incurring a huge loss of Tk27,477 crore in FY2022, from Tk6,200 crore in FY2018 due to sales of electricity at a lower rate at Tk6.70 than it purchases electricity at higher rate.

"The BPDB has been incurring a loss of about Tk5 per unit", said an official of the Bangladesh Power Development Board (BPDB).

The gap between the production cost and sales rate is being covered by the subsidy from the government.

But while taking the decision to provide a $4.7 billion loan to Bangladesh, the IMF tagged a number of conditions and one of those was to raise electricity tariff to reduce the subsidy.

As per the condition, the government raised the bulk power tariff by about 19.92 percent – to Tk6.20 per kilowatt hour (each unit) from the previous Tk5.17 – with effect from December 2022.

Despite the rise in power tariff, still the BPDB has been incurring huge losses. The IMF has been insisting on further raising the tariff, said a Power Division official, adding that they have shared various options with the lending agency to reduce the subsidy in the power sector.

Sources said the Power Division, however, conveyed a message from the government that they have no plan to increase power tariff further before the next general election due for January 2024.

When contacted, senior secretary at the Power Division Habibur Rahman declined to comment on the outcomes of the meeting.

A recent report from the Implementation Monitoring and Evaluation Division (IMED) predicted that the BPDB's total loss for FY 2023 and FY 2024 could be Tk1,13,532 crores – meaning that the average annual loss will be Tk56,766 crores.

The team is scheduled to leave Bangladesh on 19 October after a series of meetings with different ministries and their subsidiaries and also with the central bank officials to discuss the release of the second tranche of the total loan of $4.7 billion of which the first tranche was already released.

The second tranche is expected to be released in November this year.