Billions spent on power sector yet to show results

FE Team | Published: October 16, 2011 00:00:00 | Updated: February 01, 2018 00:00:00

Habibullah N Karim One of the acute national problems the present Awami-led coalition inherited, more than two-and-a-half years ago as they formed government, is the chronic shortage of power that plunged the country into frequent hour-long outages as much as every alternate hour. Knowing fully well the public sentiment about the long suffering due to lack of adding generation capacity in line with growth in demand, the government made unstinted commitment to paying highest attention to this issue. Accordingly tenders were invited and numerous awards were made to both local and foreign independent power producers (IPP) over the last two years. To bridge the gap between demand and supply in an expeditious manner, the government even literally bit the bullet and accepted short-term rental power projects at more than twice the generating cost of regular combined-cycle power plants. The rental power projects are creating a tremendous hole of subsidies in the national budget due to the large difference between the purchase price from rental power plants and the selling price of power by the state-owned power utilities. In the budget for the current fiscal (FY) 2011-12, power and energy subsidies alone are estimated at more than Tk 120 billion (Tk 12,000 crore). Despite such humongous costs to the exchequer which is actually a drain on taxpayers' money, we are not seeing much improvement in the overall power situation. There is still several power outages a day even though we are past the peak summer months when the pressure on power demand is less. The rental power projects are supposed come on line within six months from the date of signing and most projects have been awarded more than a year back. Since we are having to swallow the bitter pill of rental power, then there should not be any excuse for not generating enough power by now. One silver lining about the new IPPs is that most are local which bodes well for the nation as we won't have to repatriate foreign currency to pay for power from the local companies. However, there have been numerous reports of inadequate scrutiny of the IPP bids resulting in many inexperienced bidders getting awards; these IPPs are now causing delays in delivering power to the national grid even though large import bills on account of power plant procurements from abroad have already emaciated our balance of payment situation. On the one hand, we are prouder as a nation seeing local entrepreneurs breaking the billion dollar barrier in local investments in this sector. We are disturbed, on the other hand, by the huge mismatch between the promise of the government and the reality on the ground when it comes to actual growth in power generation. This is especially painful since the interim solution of rental power plants is a triple whammy loss-leader for the government and the nation. Firstly, the cost of power is more than twice of regular plants as mentioned earlier; secondly, the rental power plants are smaller-capacity and lower-efficiency older plants that cause tremendous harm to the environment by burning more fossil-fuel to produce the same amount of power than larger combined-cycle power plants; and thirdly, the large investments in rental power plants will become caustic assets and will have to be written off when regular power plants come on line to meet demand. However, one issue baffles the whole nation as to why the government has put coal extraction and its use on ice. All the recent spate of IPPs are using furnace oil as fuel which is imported and so is already creating pressures on the import bills. Coal on the other hand is right under our feet and will not only save us from paying out in foreign currencies but more importantly our cost of producing power from coal-based plants will be much lower, making coal-based power a much more pragmatic alternative to gas-fired power plants - the only other cost-effective method. In the face of spirited growth in exports and increasing living standards requiring higher power consumption, there is no alternative to mitigating the power supply situation on a war-footing. The defaulting IPPs must be taken to task as per law and those meeting delivery targets should be encouraged to add capacity and thereby make the lives of citizens and entrepreneurs bearable at the earliest. Readers can watch today's episode of Orthonitir Chaka at 5:30pm on Boishakhi Television for an in-depth discussion on the developments in the power sector with Aziz Khan, chairman, Summit Group and Aftabul Islam, president of the American Chamber of Commerce in Bangladesh. The programme will be repeated at 12:30am and will also be available online from Thursday at BDeshTV.com. The Financial Express is the media partner and American International University of Bangladesh (AIUB) is the technical collaboration partner of Orhonitir Chaka. (Habibullah N Karim is an IT entrepreneur, policy activist and the anchor of Orthonitir Chaka. He can be reached at e-mail: hnkarim@gmail.com)