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Plan to phase out minimum capacity charge of quick rental power

The move will reduce costs, bloster financial stability: Finance minister

FE REPORT | June 02, 2023 00:00:00

The government intends to gradually eliminate the payment of minimum capacity charges for rental power plants or rent-operated power plants by removing the relevant clause during contract renewal, according to Finance Minister AHM Mustafa Kamal.

During his budget speech on Thursday, the minister said that this measure is to reduce supply costs and strengthen financial stability within the power sector.

To reduce subsidy expenditures, the government has already increased the prices of electricity, gas, and fuel, said the minister. A roadmap is currently being formulated to establish a permanent system of formula-based price adjustment in the energy sector.

"We hope to finalise the formula-based price adjustment system by September this year," he said.

He expressed hope that total subsidies would gradually decrease in the medium term due to the recent price increases and the implementation of the upcoming adjustment mechanism.

However, the burden of subsidy expenditure will take some time to fully dissipate due to accumulated arrears. "Therefore, we need to increase the amount of power and agriculture subsidies in the next financial year as well," he added.

The finance minister has proposed an allocation of Tk 348.19 billion for the Power and Energy sector in the next fiscal year 2023-24, representing a 33.58 per cent increase compared to the current fiscal year's Tk 260.66 billion.

While presenting the national budget, AHM Mustafa Kamal outlined the government's plan to import around 9,000 megawatts (MW) of electricity from neighbouring countries by 2041.

At present, a total of 1,160 MW of electricity is being imported from India through the inter-country grid connection.

Additionally, the national grid has added 748 MW of electricity from the first unit of two coal-fired power plants in Jharkhand, India.

The finance minister mentioned that the signing of an agreement for the import of 500 MW of electricity from a hydro-electric power plant, to be constructed in collaboration with Nepal, is in the final stages.

Additionally, a tripartite memorandum of understanding (MoU) for electricity import from Bhutan is set to be signed soon, involving Bangladesh, Bhutan, and India.

Highlighting the government's accomplishments, the finance minister said that electricity facilities have been extended to the entire population of the country. The power generation capacity has surged from 4,942 MW in 2009 to the current 26,700 MW.

In order to diversify the energy sources for power generation, the government is focusing on coal, LNG, liquid fuel, dual-fuel, nuclear power plants and renewable energy-based power generation, he said.

Currently, 33 power plants with a total capacity of 12,094 MW are under construction through public-private joint ventures and contracts are being signed for the establishment of 17 power plants with a capacity of 2,416 MW.

Besides, plans have been made to set up an additional 34 power plants with a total capacity of 10,443 MW.

"Our government has set a target of using renewable energy at 10 per cent of total electricity generation by 2030," he said.

Moreover, there is a goal to generate 40 per cent of the total electricity production from clean energy by 2041.

Across the country, eight solar parks have been established and solar-powered pumps are being installed to replace diesel-powered pumps, reducing carbon emissions. As of now, 2,570 pumps with a combined capacity of 49.16 MW have been installed.

The finance minister noted that the current electricity generation from renewable energy stands at 894 MW.

According to him, significant progress has been made in the expansion of distribution lines, which have increased from 369,000 km to 669,000 km. Consequently, power system losses have decreased from 14 per cent to 7.7 per cent.

"Our goal is to expand the transmission lines to 28,000 km by 2030," he added.

Compared to 2009, the storage capacity of fuel oil has risen from 894,000 tonnes to 1.36 million tonnes in FY22.

Besides, various measures have been taken to increase the storage capacity of fuel oil to 60 days, doubling the previous 30-day capacity, as mentioned by the finance minister.

There is a decision to construct a large integrated oil refinery storage tank in the Payra seaport area. A feasibility study of introducing an 'Integrated Automation System' to facilitate operations, sales and accounts of the fuel oil sector is being carried out.

Exploration activities have been intensified to increase oil and gas production.

BAPEX, the country's only oil and gas exploration company, has increased daily gas production by 984 million cubic feet per day (mmcfd) followed by capacity expansion.

Another 46 gas wells will be drilled by December 2024, he said, adding that after drilling the wells, 618 mmcfd of gas will be added to the national grid per day.

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