Bangladesh hikes electricity prices by 21 pct

DHAKA Dec 22 (Reuters) - Bangladesh's energy regulator said on Thursday it had approved hikes in electricity prices for retail consumers by an average of 21.3 percent in two stages by February to cut the losses of the state-run power generating firm.

"We decided to raise electricity price to reduce the pressure on government funds as it has to borrow from the banking system to subsidise the higher price of electricity," Syed Yusuf Hossain, chairman of the Bangladesh Energy Regulation Commission (BERC), told reporters.

The first increase will be factored into December bills and the second in February bills to reach an average of 4.63 taka per kilowatt hour (KWh), he said.

Even after these increases, prices are still not high enough to cover power generation costs of the state-run Bangladesh Power Development Board (BPDB), which has been asking for a series of price rises in six-month steps.

The BPDB posted a loss of nearly $541 million in the fiscal year to June 2011.

Its costs rose by 85 percent year-on-year to an average of 4.86 per KWh in fiscal year to June 2012 due to the installation of dozens of high-cost diesel and furnace-oil fired power plants, BPDB said.

More than 40 percent of power production in Bangladesh comes from the private sector. The BPDB purchases electricity from privately owned generation companies and sells to state-run distribution agencies to reach end-users.

Bangladesh suffers from chronic electricity shortages of up to 1,500 MW per day, which constrain growth and discourage investors. (Reporting By Serajul Quadir, editing by Jane Baird)