Forget about duty exemption for furnace oil
The earnings authority has withdrawn duty-free import privilege for furnace essential oil as a way to discourage establishment of electric power plants using the fuel and plug annual earnings losses of Tk 2,000 crore.
The approach comes at the same time when imports of the expensive fuel for power generation are soaring even though overall require for electricity stands many below the generation capacity.
Moreover, it is five occasions cheaper to create electricity with gas-based ability plants, thanks to import of liquefied gas (LNG).
As well, a new-coal based power plant having 600 megawatts of generation capacity has enter into operation lately at the southern seaport area of Payra.
Because of this, power era by gas rose.
Share of gas-based vitality plants in net electricity generation of 70,533 GWh increased by 5 percentage points to 68 % in fiscal 2018-19 from that of the this past year, showed Bangladesh Power Production Board (BPDB) data.
As well, share of furnace oil declined by more than one percentage indicate 16 percent in fiscal 2018-19 from that of the prior year.
As the choice fuel has already been available and the united states generates more electricity compared to the demand, the National Board of Revenue (NBR) has sought to eliminate duty benefit for furnace oil import within tax measures for another fiscal year, said officials.
The change became effective from June 11, according to a notification.
"The withdrawal of the exemption provides us Tk 2,000 crore earnings that people lost annually in the past," stated a senior official of the NBR wanting to remain unnamed.
The NBR offered duty-free benefit to import furnace oil in 2011 within the government's objective to improve generation capacity to meet up the country's energy deficit and increasing demand for energy from the growing economy.
Encouraged by removing import tariffs, furnace oil import soared each year since fiscal 2014-15.
Import of the energy increased 14 per cent year-on-season to 18 lakh tonnes in fiscal 2018-19 from a year ago.
Simultaneously, the quantity of duty exemption increased.
Officials said total tax incidence for import of furnace oil will be 35 per cent after the removal of the tariff-free benefit.
"The power generation expense by furnace oil will increase as import costs will rise," said a senior official of the BPDB.
Currently, the country has 55 furnace oil-based power plants, including almost 40 owned simply by private investors.
The combined generation capacity of power plants predicated on the fuel is 5,430 MW, which is 27 percent of the full total generation capacity, showed the BPDB data.
Financing ministry officials said per product cost of electricity made by furnace essential oil is Tk 13.77 whereas it is Tk 2.72 for gas.
Discouraging the establishment of furnace oil-based power plant life will probably reduce strain on the state coffer for subsidies provided on power production.
The federal government had to bear practically Tk 9,000 crore as subsidy for electricity this past year, said the official.
Officials of Bangladesh Petroleum Corporation (BPC) welcomed the decision and expected sales of the energy by the state firm to rebound following removal of duty exemption for furnace essential oil.
Despite the overall increase in furnace oil import in the united states, the BPC's sales of the fuel to electric power plant life slumped by half year-on-year to 3.19 lakh tonnes in fiscal 2018-19 from 6.5 lakh tonnes the previous year, explained BPC Director Operation Syed Mehdi Hasan.
"It is a great decision," he said.
Khondaker Golam Moazzem, research director of the Center for Plan Dialogue (CPD), said the government needs to gather an increased amount of income. As the import of furnace essential oil increases, there is normally prospect of getting revenue out of this source, he said.
"Besides, additionally it is a positive maneuver from the actual fact that we curently have overcapacity in vitality generation," he added.
However, the Customers Association of Bangladesh (CAB) Adviser for Energy Prof M Shamsul Alam explained withdrawal of duty benefit without stopping power generation through oil would increase price.
"Provided the overcapacity, we demand the federal government stop purchasing energy from oil based vitality plants in individual sector. The government should consider this in this Covid-19 crisis," he said.
