The statements from the World Bank and the Asian Development Bank (ADB) come one week after the government shelved a price hike announced at the end of October following a public backlash, while the Ministry of Power has promised parliament to review the proposed increases.
But the electricity supply will not be improved and shortages will likely worsen without new funding, the World Bank said in a statement on November 15, adding that the government should enact measures to protect poor and vulnerable customers in well-designed tariff reform.
“Myanmar’s economy is growing and the need for electricity is increasing. The costs of producing and supplying additional electricity to existing and new producers will increase, while industrial and commercial businesses will be able to pay higher electricity tariffs,” said the statement.
“Without new funding, the electricity supply will not improve and the shortages which affect Myanmar’s towns and cities presently will get worse,” it continues.
The country will need a total of 2370 megawatts of electricity in the next hot season between April and July, while current production is just 1655MW, Minister for Electric Power U Khin Maung Soe told state media on November 13.
“The ministry is trying to increase supply by 202MW from hydropower plants that are still under construction and 259.1MW from gas-fired power plants. It is not enough to supply the coming season. We are going to develop a new gas-fired power plant with 100MW capacity in time,” he said.
Amid growing production costs and higher demand, the Ministry of Electric Power announced in October that starting this month it would raise electricity rates, but have since reneged on the initiative following public outcry that led to widespread protests.
According to the terms of the announcement, households would experience a 43 percent price hike, from K35 to K50 per unit, for every unit used over 100 kilowatt hours, while commercial users would pay 50pc more, or K150, for each unit consumed above 5000 units.
But with the plan under review and the hike now pushed back until the next financial year, the government remains out of pocket, while power consumption is expected to increase another 15pc this year.
“In order to ensure the financial viability of the power sector, which is needed to expand electricity access to more people in the country, either tariff rates need to be increased or even greater government subsidies, paid for by taxpayers, will be required,” Jong-Inn Kim, lead energy specialist at the ADB’s energy division, told The Myanmar Times.
“One possible solution is a phased approach, which maintains low lifeline tariffs for poor households and small businesses. Under this approach, households and small businesses with low electricity usage rates still pay lower subsidised rates, while tariffs for major electricity users slowly increase over time,” he said.
He added that once the transition is completed, the higher tariffs for major users will cover the lifeline tariffs for poorer users, while higher tariffs for major users will also help attract more private investments in Myanmar’s power sector.
Where the government estimates losses of K185 billion per annum on electricity, total subsidies amount to K500-600 billion for the 2012-13 and 2013-14 fiscal years – equivalent to over 1.1pc of Myanmar’s GDP, according to the ADB.
Four gas-fired power plants in the Yangon area are now ready for production, but the Power Purchase Agreement with the Ministry of Electric Power is still under discussion.
Private companies, meanwhile, have invested a total of US$270 million in the plants and are expecting to sell electricity at K210 per unit, said U Zeya Thura Mon, CEO of Myanmar Central Power Company.
“The government price increase is quite relevant. It is designed not to be a burden for vulnerable users. If the government cannot increase prices, the country must pay higher subsidies. Without private investment, power supplies will be insufficient because the ministry doesn’t have the money. Subsidisation is closer to socialism than to the market economy,” he said.
According to the ministry, only 224 towns out of 396 have access to electricity, and more than 40,000 of 60,000 villages go without power, leaving 70pc of the country’s population lacking access to electricity.
source: The Myanmar Times
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