Capacity payments have brought nothing but misery

At a time when the public is having to bear the brunt of soaring prices of electricity and gas, with both power sources experiencing acute shortages in recent months, it is shocking that as much as one-fourth of the government's subsidy allocations go to the power sector, that too mostly for capacity payments to private power plants. The present budget, moreover, shows that the government has no intention of changing this burdensome situation. It reflects a flawed policy that experts have been criticising for long, to little effect so far.

At a recent event, the Centre for Policy Dialogue (CPD) has highlighted the heavy burden placed on the Power Development Board (PDB) as a result of these capacity payments, which are part of maintaining a privately-owned plant regardless of whether it is supplying electricity or not. The PDB incurred an operating loss of Tk 27,477 crore in FY2021-2022. In FY2017-2018, it was Tk 6,200. The massive increase in losses was largely due to surging capacity payments, prompting an expert to liken the PDB to "a white elephant", with the cost ultimately borne by the taxpayers.

At a time when the fuel crisis has emerged as the biggest challenge for Bangladesh, it is mindboggling that we continue to be saddled with such burdens. As CPD has pointed out, increasing the electricity generation capacity without increasing the distribution capacity has resulted in as much as 50 percent of the capacity left unused. Meanwhile, the country has been facing gruelling hours of load shedding in the hottest months, with factories and other business establishments either sitting idle or having to use expensive generators. The subsidy management is being done by placing a huge burden on the consumers who are already struggling to cope with the soaring prices of electricity and gas as well as food.

When the prices of fuel and gas go up, the cost of everything else goes up too, placing extreme financial pressure on ordinary people. The government's overreliance on fuel imports has also increased that pressure. We, therefore, urge the government to heed the advice of experts and start phasing out capacity payments while adopting a policy of exploring gas reserves within the country and focusing on developing renewables. Both endeavours would, in the long run, reduce this unhealthy reliance on expensive imported fuels and enormously benefit the people.