The government is set to hike electricity and energy prices from the first week of March in its efforts to reduce subsidy bills from the state coffer, said State Minister for Power, Energy and Mineral Resources Nasrul Hamid today.

Electricity prices will go up by 34 paisa per unit, he said responding to reporters at his office at the secretariat.

The power producers that are using gas to generate electricity are also going to see higher prices of gas from next month, according to the minister.

He said prices are going to be increased as the government has to bear a good amount of subsidy to import fuel. This is because of higher cost of the US dollar as the taka weakens.

When coal power plants were introduced, the US dollar traded at Tk 80. Now the cost of dollar is over Tk 110 and more, said Nasrul.

He said nearly 1.40 crore customers pay Tk 4 for per unit of electricity usage. Customers who use higher units require to pay Tk 7 per unit of electricity.

But, he said, the average generation cost of electricity is Tk 12 per unit. 

The government has to bear the rest of the cost from public exchequer, he said, adding that the amount of subsidy for electricity would be around Tk 43,000 crore in the current fiscal year 2023-24.

In the case of petroleum, total subsidy requirement would be nearly Tk 6,500 crore.

The government is also going to introduce an automatic fuel pricing mechanism in March in order to comply with one of the conditions of the $4.7 billion loans given by the International Monetary Fund (IMF).

The Washington-based multilateral lender suggests the adoption of the automatic pricing of fuel to curb subsidies enjoyed by people irrespective of their incomes and ensure targeted support for the poor.

This is expected to dramatically lessen the subsidy burden and pave the way for enhanced social spending.

Under dynamic fuel pricing, which is followed by most countries, local prices are synced with international ones, reflecting the fluctuations in the global market. 

If the prices go up in the international market, they will automatically increase in the local market and vice versa.

At the briefing today, Hamid said Bangladesh Petroleum Corporation will implement the automatic pricing of petroleum products