Financial status of consumers should be considered

The current government had promised to ensure electricity to every household and accordingly, the country was progressing. However, over the past two years, electricity prices have increased significantly, and the country has also experienced severe power shortages in recent months.

Moreover, if the electricity prices increase again, there will be a surge in overall inflation in the country. As a result, the common citizens with lower incomes will again bear the brunt of the rising costs. Common people are already in trouble because the cost of living has increased compared to the income.

Today, Saturday (January 27), a report published in a news outlet states that the International Monetary Fund (IMF) is urging to free the electricity and fuel sectors from subsidy as a condition for the loan. The government has been making efforts for a long time to remove subsidies in this sector. In pursuit of this objective, the Power Development Board has conducted an analysis. According to their findings, if subsidies are removed, electricity prices may increase by 78 percent. The organization recommends a gradual adjustment of prices step by step to make it more affordable for the general public.

The Electricity Department is stating that the method of harmonizing prices to reduce the subsidy is under consideration. If the fuel prices remain unchanged, the Power Development Board (PDB) is expected to phase out subsidies within the next two to three years. Generally, the Power

Development Board (PDB) initially purchases electricity from both government and private power generation centers. Subsequently, the PDB sells that electricity to distribution companies at a wholesale price. Afterwards, the distribution companies deliver electricity to consumers at retail prices. As a result, in the last 12 years, electricity prices in the country have increased nine times. In these 12 years, wholesale prices have increased by 118 percent, and retail prices have increased by 90 percent. Therefore, if electricity prices increase again, it will have an adverse impact on the general public.

In August 2022, after an increase in the price of fuel, the government faced widespread pressure. During that time, there was scheduled load shedding in the country. Now, due to the winter season, the demand for electricity is lower in the country. Therefore, load shedding is not occurring. It is necessary to consider how appropriate it will be for the government to increase the price of electricity by removing the subsidy from the electricity sector.

The current rise in electricity prices is believed by experts to be due to several factors. In this context, it is suggested that, as a result of borrowing from the International Monetary Fund (IMF) to meet the reserve crisis, the IMF's representative team has advised the government to reduce subsidies in various accounts, including electricity and fuel. As part of their commitment to fiscal discipline, the government may be implementing measures to minimize subsidies in different sectors, including electricity.

In addition to the government, various economic organizations are also providing financial assistance. These organizations have advised the government on reducing subsidies. Therefore, discussions are underway about withdrawing subsidies from the electricity account.

The affluent primarily enjoy the benefits of electricity supply since they consume more electricity and fuel. So, the affluent are encouraged to move away from subsidies. But in doing so, the disadvantaged groups, small and medium-sized businesses, and entrepreneurs will all be adversely affected.

To achieve this, on one hand, efforts should be made to reduce subsidies, and on the other hand, the scope of social safety nets needs to be expanded. If there is no subsidy, those who will be affected at the marginal level will get the compensation in a different name.

However, increasing the price is not the only solution to reduce dependence on subsidies; expenses must also be minimized. It is essential to bear in mind that the power sector has long been marred by allegations of corruption, malpractice, and irregularities. Implementing appropriate measures to address these issues would prevent the frequent increase in electricity prices and curb inflation.