Power price hike will raise monthly expenses by 9.4%: CPD

 
Researchers of Center for Policy Dialogue (CPD) have said that the increased electricity price will raise people's monthly expenses by 9.4%. Following a hike of gas prices two days ago, the government on 1 March 2024 increased average electricity tariffs by 8.5%. At the wholesale level, the current average price increases to Tk7.04 per unit from Tk6.70, while at the retail level, the price jumps to Tk8.95 from Tk8.25.

The increase is in effect from today instead of next month announced earlier, said State Minister for Power, Energy and Mineral Resources Nasrul Hamid on 29 February. He said February bills for prepaid meter customers will be adjusted in their next payment.

A review of the electricity price hike data shows that the electricity price will increase by 28 paisa per unit for the lowest users or "Life Line" customers (users of zero to 50 units). This will add a maximum of Tk14 to the monthly bill.

A residential customer using 0 to 75 units will see an increase of 41 paisa per unit, which will increase the monthly bill to a maximum of Tk31.
For residential customers using up to 200 units, the cost will increase by 57 paisa per unit. This will increase their monthly bill by a maximum of Tk114. Similarly, the maximum monthly consumption of customers using 300 units will increase by a maximum Tk192, the monthly bill of customers using up to 400 units will increase by a maximum of Tk272, the monthly bill of customers using 600 units of electricity will increase by a maximum of Tk696.

A 43 paisa increase per unit for irrigation customers will result in a maximum of Tk430 increase for up to 1,000 units use.
Analysts and experts said the move implies that individuals and businesses must allocate a larger portion of their budget to cover electricity expenses. This will reduce their disposable income, while also impacting businesses' profit margins and competitiveness.

They warned that this hike could contribute to an increase in inflation as electricity serves as a fundamental input in the production process across various sectors. As businesses grapple with higher electricity costs, they are likely to pass on these expenses to consumers by raising prices.

This ripple effect could lead to widespread price hikes throughout the economy - from everyday household items to agriculture irrigation for food production, worsening inflationary pressures.

The decision to raise energy prices comes at a time when wholesale electricity prices have fallen in many parts of the world. According to the International Energy Agency (IEA), 2023 witnessed a decline in electricity prices after reaching record highs in 2022, particularly in Europe and Asia.
Energy expert Shamsul Alam, senior vice president of the Consumers Association of Bangladesh (CAB), pointed out the adverse effects of increasing electricity prices amidst rising inflation.

He said the flawed policies in the power sector have created opportunities for certain companies to exploit the situation.
"The government's policy confusion in the power sector and enabling looting by some companies has now increased the prices, thereby affecting the low-income people the most," he added.