Expediting power for development
Manzur Ahmed | Monday, 14 July 2008
WHERE we are? To improve the socio-economic condition and to alleviate poverty, expediting efforts for power supplies to facilitate progress must be one of the top most agenda of the government. But the country is currently facing chronic and massive power shortage, causing serious dislocation in all spheres of life including production in fields and factories.
What we need? Robust growth of the economy will make Bangladesh an energy-hungry country. The World Bank (WB) fact-sheet 2005-2006 says that Bangladesh is the tenth most rapidly growing economy among 31 developing countries. The Global Economics Paper in its issue dated December 1, 2005, has placed Bangladesh among the "next 11" countries, after Brazil, Russia, India, and China, which have the potential to be substantial economies in the next decade.
The country will be looking for more and more fuel as demand soars with rapid economic growth; and our small reserve of natural gas will be used up in less than a decade. The demand for electricity in Bangladesh is increasing at a very rapid rate -- at least 2,500 MW a year, to keep pace with economic performance.
According to the Power Cell projections, electricity demand is expected to grow at the rate of 8.0-10% per annum to about 6,000 MW by 2009. Thus, about 2,800 MW of new generation capacity will be needed to ensure reliable supply of power to be raised to at least 7,300 MW.
Simultaneously, about 2300 circuit km (1200 Km 230 kV and 1100 Km 132 kV) of transmission line and about 50,000 km of distribution line will have to be constructed for evacuation and distribution of power.
The domestic production of gas and coal will be unable to meet the requirement of increased power generation. We must therefore seriously look for energy security and sustained growth of power generation, import of electricity, coal, natural gas and LNG to keep pace with our rapidly falling reserves and ever growing demands.
We can get supply of gas and hydro electricity from Myanmar most conveniently compared to other sources including hydro electricity from the much talked-about Nepal and Bhutan.
To ensure long term energy security Bangladesh must outsource its energy resources and Myanmar, because of its proximity, is the ideal source of most convenient, safe and continued supply of electricity, oil and gas.
Bangladesh therefore should readily agree, as the first beneficiary at virtually no cost, to allow Myanmar-India gas pipeline through its territory to avail the opportunity of obtaining supply of gas at highly cost effective price from Myanmar to meet its growing energy needs, in addition to inherent revenue and other associated benefits.
What must we do? The power sector must be restructured to improve its efficiency, transparency and overall governance, facilitate effective and independent regulation, expand competition, and begin to improve the quality of electricity services.
1. The Power Development Board (PDB), established by the Bangladesh Water and Power Development Boards Order, 1972 (Presidential Order Number 59 of 1972) to control over the operation of all power system, is a "statutory public authority" within the meaning of Sections 149 and 152 of the Bangladesh Constitution.
2. To corporatize and ensure autonomous functions of the BPDB without interference of the government Securities & Exchange Commission (SEC model) as a "statutory public authority" and a corporate body, Articles 4, 5, 6, 10, 11, 12, 15, 16, 20, 21 22, 24, 25, 26, 27 and 28 of the Presidential Order Number 59 of 1972 shall have to be suitably amended.
3. Cutting down proliferation of too many corporate bodies, some times with overlapping jurisdiction, is one of the most prudent areas for reform. The PGCB should be merged with the BPDB the "statutory public authority" with 100 per cent state ownership. The BPDB as a autonomous body corporate could then function and operate as the single power purchaser, transmitter and sole supplier of power to the distribution companies, ensuring there-by, in public interest, overall security and safety of power transmission and, at the same time, maintaining complete control over the vital generation, transmission and distribution network of electricity.
4. The BPDB as the "statutory public authority" with 100% state ownership may privatize its power generation utilities through amendment of Article 21 of the P O 59 of 1972) to provide for joint ventures with the Bangladesh private sector, non-resident Bangladeshis and foreign investors including existing independent power production (IPPs).
5. All existing power generating units of the [country/ BPDB] should then be transformed into public limited companies under the Companies Act 1994 with 55 per cent share for the BPDB, 35 per cent for Bangladesh private sector, non resident Bangladeshis and foreign investors and 10 per cent for the officials and workers of the respective utilities.
6. The BPDB may take up, with the fund obtained by selling 45% of its existing shares and government of Bangladesh (GoB) allocations, short and long term power generation programme through joint ventures with Bangladesh private sector and foreign investor participation with at least 55 per cent shares remaining with the BPDB.
7. Coal-mine based Power Station: Private sector, local and foreign joint venture undertakings having commercial presence as a registered publicly listed limited company in Bangladesh, should only be eligible to invest in coal-mine based power stations, in collaboration with the public sector as per terms and conditions set out in rules to be made in this behalf.
8. Each of the existing distribution assets and marketing units of the BPDB, the DESA, and the DESCO etc., should be converted into public limited companies under the Companies Act 1994 with 55 per cent share remaining with the GoB, 35 per cent for Bangladesh private sector, non resident Bangladeshis and foreign investor and 10 per cent for the officials and workers of the respective utilities. Provided that the BPDB as the single power purchaser and sole supplier of power to the distribution companies shall not have any share in any of the distribution companies.
9. Power sector reform must not preclude the existing work force in the power sector. Engineers, technicians, expert officials and experienced workers are not only national assets, they are also integral part and also most valuable prerequisite for any power sector regime. Along with ever growing demand of electricity, demand for such manpower shall grow steadily. The entire work force in the power sector must therefore effectively be utilized in the development of power system of the country
10. [10 per cent] shares should be kept reserved for the officials and workers of the respective utilities on attractive terms such as quota of free shares locked for a period of five years and cash loan on soft terms for purchase of shares may also be given.
11. Palli Biddyut Samities (PBSs) should run totally on commercial lines fully responsible for any system loss and liabilities on accumulated account receivables for which no subsidy be made available otherwise PBSs should also be converted into public limited companies under the Companies Act 1994.
12. Protecting Consumer's Rights and Dispute Resolution: It is advised that BERC should formulate the guidelines regarding setting up of grievance redressing forum by the licensees as also the regulations regarding the Ombudsman and also appoint/designate the Ombudsman.
Suspension of Sections 3 to 11, Sub-sections (2) and (3) of Section 21, Sections 22, 23 and 27 or clauses I to XI of the Schedule to the Electricity Act 1910 have totally exempted the power utilities from:
l Accountability
l Obligations and responsibilities towards the consumers;
l Rational principle and method of charging and energy billing system;
l Rational and equitable licensee and consumer relationship.
l Protection of the consumer's right.
13. Renovation and Modernization (R&M): All existing generation capacity must be brought to minimum acceptable standards. For projects performing below acceptable standards and for achieving higher efficiency levels, R&M should be undertaken as per well-defined plans featuring necessary cost-benefit analysis.
The Power Division had earlier reported that eleven of about 16 inoperative power generation units would be able to resume operation by completion of the necessary maintenance and overhauling work. These units are expected to generate more than 810MW electricity and thus will significantly reduce the existing 1,000-1,500MW gap between supply and demand.
14. Distributed Energy: Distributed energy resources describe a variety of smaller electricity-generating options well suited for placement in homes, offices, and factories, or near these facilities. Distributed energy systems have the distinct advantage of being brought on line faster than new central power plants.
Better integration of electricity supply systems and customers can produce a variety of benefits for tight energy markets, including reducing peak demand loads, bypassing congested areas of transmission by placing new generating capacity closer to the consumer, and thus achieving greater overall system efficiencies.
Industrial production and distribution chain should be declared as one of the top priority sector for uninterrupted supply of power.
15. The probable large capacity base of captive and co-generation offers a sizeable potential capacity which could be harnessed for meeting requirements, particularly for peak load periods. Captive and co-generators can supply their surplus power to the grid and to rural areas locally as distributed generation. Clustered industrial and small & medium enterprise (SME) zones, market complexes, housing estates and other bulk consumers of power should be encouraged to set up captive power plants by ensuring :-
i) Low interest (at below 5.0 per cent) funding with three years interest freeze;
ii) Sustained supply of duty free coal, gas or LNG for power generation;
iii)Duty free procurement of all inputs;
iv)Technical and HRD Assistance for operation and maintenance.
16. Renewable energy: The sources of non-hydropower renewable electricity generation are biomass (the direct combustion of plant matter and organic residues, such as municipal solid waste use, biogas, wind; and solar). Renewable and non-conventional sources of energy being the most environment-friendly, there is an urgent need to promote generation of electricity based on such sources of energy, for public interest, by exempting the sector from all duties and reducing the capital cost of projects based on non-conventional and renewable sources of energy.
17. To ensure and facilitate investment in the energy Sector the following policies, among others, must be adopted.
l Special banking facilities should be established to finance the projects in the power and energy sector at the marginal simple rate of interest with three years interest freeze.
l Terms of re-lending should be soft and interest rate should not exceed more than 2.0 per cent of the rate at which the government procured the funds as loan (or grant)
l Tax exemptions should be provided to encourage investments in the energy sector. Energy related projects should enjoy tax holiday for first five years.
l No duty (including VAT) should be levied on machinery, equipment, spares and other consumable for energy related projects. Locally manufactures manufactured machinery, products and services used in the energy sector should also be free of all duties including VAT.
l Efforts should be made to encourage non-resident Bangladeshis, including wage earners abroad, to invest in the energy & power sector.
l Labour union activities should remain strictly outside political activity and interference. Power sector should be declared as an essential service sector.
l All bills and dues payable to the power sector companies including distribution companies should be recoverable under the Public Demands Recovery Act, 1913 and section 54A of the Electricity Act, 1910.
l Power sector companies including distribution companies should be entitled to the services and co-operations of the law enforcing agencies and local government authorities as prescribed in section 54B of the Electricity Act, 1910 for carrying out generation, transmission, distribution and maintenance of supply of electricity through out Bangladesh and to prevent unlawful and unauthorized use and pilferage of electricity.
18. Energy Conservation: The Energy Regulatory Commissions should ensure adherence to the following energy efficiency standards by utilities and the consumers:
l Energy conservation measures should be adopted in all government, commercial and apartment buildings and markets.
l In high consumption sectors, energy efficient technologies with emphasis on labeling of appliances should be used and energy audits carried out to indicate scope for energy conservation measures.
l Appliance, including refrigerators, freezers, room air conditioners, fans, fluorescent lamp ballasts, incandescent reflector lamps, clothes dryers, clothes washers, dishwashers, kitchen ranges, oven, pool heaters, and water heaters, manufacturers must produce products that meet the minimum level of energy efficiency. These standards will stimulate energy savings that benefit the consumer, and reduce fossil fuel consumption, thus reducing air emissions.
l In the agriculture sector, the pump sets of high quality and the water delivery system engineered for high efficiency should be promoted.
l Energy efficient lighting technologies should also be adopted in industries, commercial and domestic establishments.
l Municipal, household and organic wastes should be converted to asset by composting and generating electricity.
l Bio-gas plants, solar and coastal wind power should be given highest level of patronage.
19. System Losses: Poor management, weak administration, undisciplined employees, corruption both at utility and consumer levels, lack of firm political support are responsible for high system losses in the power sector.
High system losses in the sector, large amount of accounts receivable and existing tariff rates and structure are affecting the financial viability of the utilities and discouraging investment in the sector.
Nothing less than complete transformation of the existing generation and distribution utilities into public limited companies under the provisions of Companies Act 1994 with GoB and private sector participation, can ensure appropriate technical and commercial management to eradicate the legacy of mismanagement, inefficiency, corruption and the resultant system loss. The nation has waited too long at the cost of its people and economic development.
20. Bangladesh Energy Regulatory Commission (BERC): The BERC should specify expected standards of performance.
Parameters should include, amongst others, frequency and duration of interruption, voltage parameters, transformer failure rates, waiting time for restoration of supply, percentage defective meters and waiting list of new connections.
Reliability Index (RI) of supply of power to consumers should be indicated by the distribution licensee. A road map for declaration of RI for all cities and towns up to also for rural areas should be drawn by up BERC. The data of RI should be compiled and published.
The writer is Adviser, the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI). He can be reached at e-mail: mz0192003@yahoo.com
What we need? Robust growth of the economy will make Bangladesh an energy-hungry country. The World Bank (WB) fact-sheet 2005-2006 says that Bangladesh is the tenth most rapidly growing economy among 31 developing countries. The Global Economics Paper in its issue dated December 1, 2005, has placed Bangladesh among the "next 11" countries, after Brazil, Russia, India, and China, which have the potential to be substantial economies in the next decade.
The country will be looking for more and more fuel as demand soars with rapid economic growth; and our small reserve of natural gas will be used up in less than a decade. The demand for electricity in Bangladesh is increasing at a very rapid rate -- at least 2,500 MW a year, to keep pace with economic performance.
According to the Power Cell projections, electricity demand is expected to grow at the rate of 8.0-10% per annum to about 6,000 MW by 2009. Thus, about 2,800 MW of new generation capacity will be needed to ensure reliable supply of power to be raised to at least 7,300 MW.
Simultaneously, about 2300 circuit km (1200 Km 230 kV and 1100 Km 132 kV) of transmission line and about 50,000 km of distribution line will have to be constructed for evacuation and distribution of power.
The domestic production of gas and coal will be unable to meet the requirement of increased power generation. We must therefore seriously look for energy security and sustained growth of power generation, import of electricity, coal, natural gas and LNG to keep pace with our rapidly falling reserves and ever growing demands.
We can get supply of gas and hydro electricity from Myanmar most conveniently compared to other sources including hydro electricity from the much talked-about Nepal and Bhutan.
To ensure long term energy security Bangladesh must outsource its energy resources and Myanmar, because of its proximity, is the ideal source of most convenient, safe and continued supply of electricity, oil and gas.
Bangladesh therefore should readily agree, as the first beneficiary at virtually no cost, to allow Myanmar-India gas pipeline through its territory to avail the opportunity of obtaining supply of gas at highly cost effective price from Myanmar to meet its growing energy needs, in addition to inherent revenue and other associated benefits.
What must we do? The power sector must be restructured to improve its efficiency, transparency and overall governance, facilitate effective and independent regulation, expand competition, and begin to improve the quality of electricity services.
1. The Power Development Board (PDB), established by the Bangladesh Water and Power Development Boards Order, 1972 (Presidential Order Number 59 of 1972) to control over the operation of all power system, is a "statutory public authority" within the meaning of Sections 149 and 152 of the Bangladesh Constitution.
2. To corporatize and ensure autonomous functions of the BPDB without interference of the government Securities & Exchange Commission (SEC model) as a "statutory public authority" and a corporate body, Articles 4, 5, 6, 10, 11, 12, 15, 16, 20, 21 22, 24, 25, 26, 27 and 28 of the Presidential Order Number 59 of 1972 shall have to be suitably amended.
3. Cutting down proliferation of too many corporate bodies, some times with overlapping jurisdiction, is one of the most prudent areas for reform. The PGCB should be merged with the BPDB the "statutory public authority" with 100 per cent state ownership. The BPDB as a autonomous body corporate could then function and operate as the single power purchaser, transmitter and sole supplier of power to the distribution companies, ensuring there-by, in public interest, overall security and safety of power transmission and, at the same time, maintaining complete control over the vital generation, transmission and distribution network of electricity.
4. The BPDB as the "statutory public authority" with 100% state ownership may privatize its power generation utilities through amendment of Article 21 of the P O 59 of 1972) to provide for joint ventures with the Bangladesh private sector, non-resident Bangladeshis and foreign investors including existing independent power production (IPPs).
5. All existing power generating units of the [country/ BPDB] should then be transformed into public limited companies under the Companies Act 1994 with 55 per cent share for the BPDB, 35 per cent for Bangladesh private sector, non resident Bangladeshis and foreign investors and 10 per cent for the officials and workers of the respective utilities.
6. The BPDB may take up, with the fund obtained by selling 45% of its existing shares and government of Bangladesh (GoB) allocations, short and long term power generation programme through joint ventures with Bangladesh private sector and foreign investor participation with at least 55 per cent shares remaining with the BPDB.
7. Coal-mine based Power Station: Private sector, local and foreign joint venture undertakings having commercial presence as a registered publicly listed limited company in Bangladesh, should only be eligible to invest in coal-mine based power stations, in collaboration with the public sector as per terms and conditions set out in rules to be made in this behalf.
8. Each of the existing distribution assets and marketing units of the BPDB, the DESA, and the DESCO etc., should be converted into public limited companies under the Companies Act 1994 with 55 per cent share remaining with the GoB, 35 per cent for Bangladesh private sector, non resident Bangladeshis and foreign investor and 10 per cent for the officials and workers of the respective utilities. Provided that the BPDB as the single power purchaser and sole supplier of power to the distribution companies shall not have any share in any of the distribution companies.
9. Power sector reform must not preclude the existing work force in the power sector. Engineers, technicians, expert officials and experienced workers are not only national assets, they are also integral part and also most valuable prerequisite for any power sector regime. Along with ever growing demand of electricity, demand for such manpower shall grow steadily. The entire work force in the power sector must therefore effectively be utilized in the development of power system of the country
10. [10 per cent] shares should be kept reserved for the officials and workers of the respective utilities on attractive terms such as quota of free shares locked for a period of five years and cash loan on soft terms for purchase of shares may also be given.
11. Palli Biddyut Samities (PBSs) should run totally on commercial lines fully responsible for any system loss and liabilities on accumulated account receivables for which no subsidy be made available otherwise PBSs should also be converted into public limited companies under the Companies Act 1994.
12. Protecting Consumer's Rights and Dispute Resolution: It is advised that BERC should formulate the guidelines regarding setting up of grievance redressing forum by the licensees as also the regulations regarding the Ombudsman and also appoint/designate the Ombudsman.
Suspension of Sections 3 to 11, Sub-sections (2) and (3) of Section 21, Sections 22, 23 and 27 or clauses I to XI of the Schedule to the Electricity Act 1910 have totally exempted the power utilities from:
l Accountability
l Obligations and responsibilities towards the consumers;
l Rational principle and method of charging and energy billing system;
l Rational and equitable licensee and consumer relationship.
l Protection of the consumer's right.
13. Renovation and Modernization (R&M): All existing generation capacity must be brought to minimum acceptable standards. For projects performing below acceptable standards and for achieving higher efficiency levels, R&M should be undertaken as per well-defined plans featuring necessary cost-benefit analysis.
The Power Division had earlier reported that eleven of about 16 inoperative power generation units would be able to resume operation by completion of the necessary maintenance and overhauling work. These units are expected to generate more than 810MW electricity and thus will significantly reduce the existing 1,000-1,500MW gap between supply and demand.
14. Distributed Energy: Distributed energy resources describe a variety of smaller electricity-generating options well suited for placement in homes, offices, and factories, or near these facilities. Distributed energy systems have the distinct advantage of being brought on line faster than new central power plants.
Better integration of electricity supply systems and customers can produce a variety of benefits for tight energy markets, including reducing peak demand loads, bypassing congested areas of transmission by placing new generating capacity closer to the consumer, and thus achieving greater overall system efficiencies.
Industrial production and distribution chain should be declared as one of the top priority sector for uninterrupted supply of power.
15. The probable large capacity base of captive and co-generation offers a sizeable potential capacity which could be harnessed for meeting requirements, particularly for peak load periods. Captive and co-generators can supply their surplus power to the grid and to rural areas locally as distributed generation. Clustered industrial and small & medium enterprise (SME) zones, market complexes, housing estates and other bulk consumers of power should be encouraged to set up captive power plants by ensuring :-
i) Low interest (at below 5.0 per cent) funding with three years interest freeze;
ii) Sustained supply of duty free coal, gas or LNG for power generation;
iii)Duty free procurement of all inputs;
iv)Technical and HRD Assistance for operation and maintenance.
16. Renewable energy: The sources of non-hydropower renewable electricity generation are biomass (the direct combustion of plant matter and organic residues, such as municipal solid waste use, biogas, wind; and solar). Renewable and non-conventional sources of energy being the most environment-friendly, there is an urgent need to promote generation of electricity based on such sources of energy, for public interest, by exempting the sector from all duties and reducing the capital cost of projects based on non-conventional and renewable sources of energy.
17. To ensure and facilitate investment in the energy Sector the following policies, among others, must be adopted.
l Special banking facilities should be established to finance the projects in the power and energy sector at the marginal simple rate of interest with three years interest freeze.
l Terms of re-lending should be soft and interest rate should not exceed more than 2.0 per cent of the rate at which the government procured the funds as loan (or grant)
l Tax exemptions should be provided to encourage investments in the energy sector. Energy related projects should enjoy tax holiday for first five years.
l No duty (including VAT) should be levied on machinery, equipment, spares and other consumable for energy related projects. Locally manufactures manufactured machinery, products and services used in the energy sector should also be free of all duties including VAT.
l Efforts should be made to encourage non-resident Bangladeshis, including wage earners abroad, to invest in the energy & power sector.
l Labour union activities should remain strictly outside political activity and interference. Power sector should be declared as an essential service sector.
l All bills and dues payable to the power sector companies including distribution companies should be recoverable under the Public Demands Recovery Act, 1913 and section 54A of the Electricity Act, 1910.
l Power sector companies including distribution companies should be entitled to the services and co-operations of the law enforcing agencies and local government authorities as prescribed in section 54B of the Electricity Act, 1910 for carrying out generation, transmission, distribution and maintenance of supply of electricity through out Bangladesh and to prevent unlawful and unauthorized use and pilferage of electricity.
18. Energy Conservation: The Energy Regulatory Commissions should ensure adherence to the following energy efficiency standards by utilities and the consumers:
l Energy conservation measures should be adopted in all government, commercial and apartment buildings and markets.
l In high consumption sectors, energy efficient technologies with emphasis on labeling of appliances should be used and energy audits carried out to indicate scope for energy conservation measures.
l Appliance, including refrigerators, freezers, room air conditioners, fans, fluorescent lamp ballasts, incandescent reflector lamps, clothes dryers, clothes washers, dishwashers, kitchen ranges, oven, pool heaters, and water heaters, manufacturers must produce products that meet the minimum level of energy efficiency. These standards will stimulate energy savings that benefit the consumer, and reduce fossil fuel consumption, thus reducing air emissions.
l In the agriculture sector, the pump sets of high quality and the water delivery system engineered for high efficiency should be promoted.
l Energy efficient lighting technologies should also be adopted in industries, commercial and domestic establishments.
l Municipal, household and organic wastes should be converted to asset by composting and generating electricity.
l Bio-gas plants, solar and coastal wind power should be given highest level of patronage.
19. System Losses: Poor management, weak administration, undisciplined employees, corruption both at utility and consumer levels, lack of firm political support are responsible for high system losses in the power sector.
High system losses in the sector, large amount of accounts receivable and existing tariff rates and structure are affecting the financial viability of the utilities and discouraging investment in the sector.
Nothing less than complete transformation of the existing generation and distribution utilities into public limited companies under the provisions of Companies Act 1994 with GoB and private sector participation, can ensure appropriate technical and commercial management to eradicate the legacy of mismanagement, inefficiency, corruption and the resultant system loss. The nation has waited too long at the cost of its people and economic development.
20. Bangladesh Energy Regulatory Commission (BERC): The BERC should specify expected standards of performance.
Parameters should include, amongst others, frequency and duration of interruption, voltage parameters, transformer failure rates, waiting time for restoration of supply, percentage defective meters and waiting list of new connections.
Reliability Index (RI) of supply of power to consumers should be indicated by the distribution licensee. A road map for declaration of RI for all cities and towns up to also for rural areas should be drawn by up BERC. The data of RI should be compiled and published.
The writer is Adviser, the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI). He can be reached at e-mail: mz0192003@yahoo.com