Power cuts cost economy 2pc in lost national growth: WB

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FE Report
Electricity shortage is a 'critical' drag on private sector growth as an estimated 2.0 per cent of the country's economic output is frittered away due to erratic power supply, says a new World Bank report.
Since 2003, the investment climate assessment report, second in a series, figured out that sales losses from power blackout on part of firms swelled to 12 per cent from 3.0 per cent.
"Electricity shortages remain a critical barrier to private sector growth and a source of major expense to firms," Tatiana Nenova, who co-authored the report with other bank staffers, said.
Nenova, also the bank's senior economist, added the private 'productive sector' such as garments, chemicals and pharmaceuticals reports significant losses as a result of power scarcity.
Bangladesh's per capita electricity generation, at 155 megawatt last year, is one of the lowest in the world and official figures put households' access to electricity at 44 per cent in 2005.
While the country's overall generation is a little over 5,000 MW, Bangladesh can use only 4400 MW. Peak demand consistently exceeds 5000 MW, with load shedding peaking at 1000MW in warmer months.
Even in low demand seasons, load shedding is usually not less than 300MW.
The report is an outcome of a comprehensive survey which found that as many as 76 per cent urban enterprises termed electricity supply a "major or severe" obstacle.
"On an average, a metropolitan firm faced 98.5 power blackouts in a month and the total annual incidence of power outages comes to 1105 hours."
"The issue (power outage) is particularly detrimental to smaller enterprises that cannot afford generators," she said, adding manufacturing firms blame low capacity utilisation primarily on scarce power. "On an average, firms can only use 80 per cent of their capacity."
Ms Nenova has noted that heavy reliance on generators in Bangladesh means the reported losses "seriously understate the true costs of the poorly performing electricity grid."
Sectors with critical reliance on power such as garments, chemicals and pharmaceuticals use generators, she said.
She added that less successful industries including textile, leather and light engineering industries with less access to investment cash were the hardest hit by their dependence on electricity.
The report's author praised private power producers, who control more than 30 per cent of generation, and said they are "more efficient and cost-effective, whereas state provision suffers from problems in governance, accountability, financial management, bad debt and collection rates."
But Ms Nenova said new investment in the power sector has been hampered by rent-seeking and poorly transparent bidding procedures, resulting in 'no substantive' addition to the national grid in the past five years.
As power generation relies on five major power plants, she said public-private partnership for generation and distribution is important to help foster higher economic growth.
Referring to tariffs, the bank economist said the last hike in March 2007, which increased urban electricity prices by 5 per cent, leaving the 'lifeline' or first tariff block of 100kwh unaltered.