Toward a brighter power outlook
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Lawmakers eventually made a move in reforming the country's energy sector, with the approval to the crucial electricity bill which would cut subsidies as well as draw new investment and widen access to electricity.
The Union Parliament yesterday approved the government’s proposal to raise electricity charges starting from April 1. During the parliament vote on Wednesday (March 19), only 18 opposition MPs including those from the National League for Democracy (NLD), voted against the increase. They showed concerns over the negative impacts on the poor and small and medium-sized enterprises (SMEs).
The increase in electricity prices has been set for a sliding scale depending on the amount of consumed units. From the flat rates of Ks 35 per unit for household use and Ks 75 for industrial use, a sliding scale will be applied, starting from April 1. The household rates will then range from Ks 35-Ks 50, while the industrial rates will rise to as much as Ks 200 for companies which consumes over 300,000 units per month.
Table: Electricity charges
- The tariffs will no longer remain flat at Ks 35 for household use and Ks75 for industrial use.
New rates
Household
35 (below 100 units)
40 (101-200)
50 (over 201 )
Industrial
75 (below 500 units)
100 (501-10,000)
125 (10,001-50,000)
150 (50,001-200,000)
125 (200,001-300,000)
100 (300,001and above)
Source: Myanmar Eleven
Some MPs voiced concerns over the scale, as some state-owned enterprises with their big sizes may be entitled to lower rates than SMEs.
The higher charges have been anticipated as Myanmar is suffering from electricity shortages, particularly in the drought season when hydropower produces less power. According to the Asian Development Bank, hydropower accounts for nearly 80 per cent of the country’s electricity supply. Though the electrification rate rose sharply from 16 per cent in 2006 to 28 per cent in 2012, power demand has risen by 15 per cent per annum. As the power rates are fixed, subsidies have been rising accordingly to Ks 284 billion at present. As the actual power rates are not known, it is also difficult for the country to attract foreign investors into the sector. Experts said that without stable suppl could slow down social and economic development in the country.
Electric Power Minister Khin Maung Soe noted that to if the state gets more income, more power plants could be built as well as sub-stations in areas where is no electricity.
According to ADB, Yangon City has the highest electrification ratio at 72 per cent, followed by Nay Pyi Taw at 65 per cent and Mandalay at 35 per cent. Only about one in five rural households are connected to the electricity grid.
In her research note, Nomita Nair, partner of international law firm Berwin Leighton Paisner which this month opened an office in the country, said that this move could send negative sentiments among the locals, particularly SMEs which contribute over 90 per cent of Myanmar businesses. Yet, the increase in electricity prices should be a positive sign to independent power producers (IPPs). She expected IPP developers to start making decision after the electricity law is passed as well as the legislative framework governing electricity tariff, regulation, generation, transmission and distribution.
In a live chat in January, Chong Chi Nai, diirector of Energy Division, ADB’s Southeast Asia Department, stressed the need for a cut in subsidies.
“Providing subsidies is not a good path to follow as it would lead to inefficient use of resources and would also impose a big fiscal burden on the government budget,” he said.
Jong-Inn Kim, the principal energy specialist of ADB, noted “Currently, willingness to pay for electricity is high in Myanmar due to its very low electrification rate and suppressed demand. Also, since Myanmar has abundant hydro resources, their supply price would be low in the long-term compared with neighboring countries.”
He noted that to ensure sustainability and efficiency, development of the energy sector should be carried out in an environmentally and sustainable manner with tariffs that reflect the cost of supply. Lifeline tariffs – subsidies to the very poor - should be provided to ensure affordability. This will help draw the much-needed foreign investment.
“In order to meet the rapidly growing demand in Myanmar, necessary energy infrastructure should be built. This cannot be done by the government alone. The private sector's role and investment is crucial in developing energy infrastructure.”
