The government is looking to gradually privatise the power-distribution and-transmission system, said Nasrul Hamid Sunday, as a study suggested huge investment in, and overhaul of, the sector.
"This will be a very crucial thing," he said, "because the whole sector is controlled by the public sector and taking the whole thing out to private sector is a challenge."
The minister stressed the need for a proper policy guideline and also carrying out a study to gauge the possible impacts of privatizing the transmission system.
He also observed that setting up independent operators for power transmission is critical to increasing transmission accessibility and ensuring better frequency control.
The State Minster for Power, Energy and Mineral Resources spoke of the government plan at a meet styled 'Bangladesh Power Conclave' organized jointly by PwC Bangladesh and PwC India in collaboration with Bangladesh Independent Power Producers Association. Findings of the report, titled 'Transforming the power sector in Bangladesh', presented by the PricewaterhouseCoopers (PwC), were released at the power-sector conclave.
The report forewarned that Bangladesh may face huge challenge in funding the heavy investment it would require in the power sector by 2041 due to the current lack of project finance, inadequate domestic funding and alternative financing.
"In Bangladesh, power projects have been predominantly financed by a consortium of local banks, non-banking financial institutions, international financial institutions, export-credit agencies," said the report.
"However, it is envisaged that Bangladesh will require heavy investment by 2041 in the power sector," noted the report, adding: "Bangladesh may face challenges to fund such investment requirement due to lack of project finance, inadequate domestic funding, poor financial health of the utilities and debt sustainability."
The PwC study comes at a time when Bangladesh's power-generation capacity has increased steadily to more than 16,000 megawatts.
However, the country is looking to increase its power-generation capacity to 60,000 megawatts by the year 2041, almost four times higher than its present capacity.
Given the huge scale of financing requirement for that target, the PwC report called for exploring alternative financing options such as green funds, power-sector financial-institution setups, strategic disinvestment of power utilities, overseas listing, increasing private participation and local currency-dominated bonds in the overseas market.
The report also suggests some regulatory actions that can be undertaken by the key stakeholders for facilitating investment such as capping interest rate by allowing London Inter-bank Offered Rate (LIBOR) with a margin for ceiling interest rate.
At the same time, it also called for relaxation of Bangladesh Investment Development Authority (BIDA) guidelines on remittance of fees to technical advisors, requirement for streamlining the approval process for foreign loans and multilayer dividend taxation.
Noting that technology is the key enablers for improving efficiency in power sector, the report highlighted a number of global trends that should be adopted in Bangladesh, like enhanced customer services, adoption of smart grid technology, digital asset management and drone-powered solution.
In the context of regulations, the study has called for a competitive power market, introduction of rationalization of tariffs and reforming subsidy management.
Chairman of Bangladesh Investment Development Authority (BIDA) Kazi M Aminul Islam, who was present at the event as special guest, identified adoption of technology, acquisition of knowledge and innovative financing as three critical issues for a boost to power sector.
Chief Executive Officer of Standard Chartered Bangladesh Naser Ezaz Bijoy in his speech called for issuing sovereign bonds in the power sector for drawing more investment.
Senior Economist of the International Finance Corporation M Masrur Reaz in his speech observed that three things are crucial for attracting funds from international financiers in to the power sector. These are attractiveness of projects, capability of management, and risk management.
UNB adds, Nasrul noted that presently about 8.0 million lifeline consumers are getting electricity at Tk 2.0 per unit for which the government has to provide huge subsidy.
`We will require to provide subsidy to power sector to become a developed nation by 2041 as power production cost is still high`, he said.
Nasrul Hamid noted that government has been pursuing an `energy-mix` policy in combination with liquid fuel, coal and liquified natural gas (LNG) in power generation in order to come out of the subsidy,
Once the power generation cost comes to a reasonable level through the energy mix policy, it will be possible to come out of the subsidy, he said.
The junior minister said the Bangladesh Energy Regulatory Commission (BERC) was asked to continue the subsidy in power sector for next 4 to 5 years.
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