Fixing problems of Bangladesh power sector
Saturday, 17 April 2010
Aman Ullah
BANGLADESH'S power sector has, of late, been in the news, talkshows and not to mention in family gossips creating an atmosphere of helplessness and despair to the extent that the people without electricity, water have joined in street protests.
If we analyse the situation starting with the actual capacity -- installed capacity of the country now stands at 6005MW (with the recently installed 51MW plant in Fenchugonj) from 354 units in 44 power stations having an average generation of 3700MW against an estimated demand of for 7000MW -- and if we factor in the 15% system loss caused by faulty lines and conditions of plants that have outlived their useful lives, the power generation figure will be even less. Out of the 6005MW installed capacity, 18 plants varying in sizes from 10MW to 90MW generating 624MW were installed during the periods April, 2008 and June 2009 and a large number of such plants were on 3-15 years rental leases.
Bangladesh Power Development Board (BPDB) is responsible for distribution of electricity in most of the areas in Bangladesh except Dhaka Metropolitan City and its adjoining areas under DESA and DESCO, areas under West Zone Power Distribution Company Ltd (WZPDCL) and some of the rural areas under Rural Electrification Board (REB).
At present only 47% of the population is served with electricity and the per capita electricity consumption is only 156Kwh (fiscal-2009) which is one of the lowest in the world.
In order to mitigate the demand shortfall, the present Government has, as the reports said, recently taken the following measures:-
1) Approved a project to build ten "peaking power plants" costing Tk72.03 billion (7203 crore) which will produce 830MW of power by end 2011.
2) Approved a project costing Tk 10.25 billion (1025 crore) to modify and renovate the units #3,4 and 5 of the Ashugonj Power Plant Complex which were built in the late 70's and early 80's.
3) Approved bids of two companies for four power plants of a combined capacity of 270MW which will use furnace oil and will come on stream by June 2011.
In addition to the above, concrete steps and some intervening measures have been/are being, taken. These include:
1) Importing LNG from Qatar to offset the gas shortage;
2) Actively considering installing nuclear power plants through Russian assistance which involve a time span of over 10 years for building;
3) Importing electricity from India, Nepal, Bhutan and Myanmar;
4) Erection of transmission lines from Bahrampur in West Bengal to Bheramara in Kushtia to allow importation of 250MW of electricity from India;
5) Shutting down some fertiliser factories and diverting gas for power generation;
6) Rationing the use of air conditioners in private homes/offices; and,
7) Encouraging use of alternate sources of energy i.e. solar energy, bio-fuel etc.
The power shortages have impacted significantly the industrial sector and the apparel/RMG sector is the worst affected one. Data available from the Research Cell of BGMEA indicates that due to actual "load shedding", the loss to the apparel/RMG sector is around Tk. 3902 million by way of lost revenue and exports and the cost of generating power through own generators during the load shedding period totals around Tk. 6131 million. The leaders of the apparel industry -- Bangladesh Garments Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) met the Prime Minister's Energy Adviser and the State Minister for Power on March 16 last to highlight the crisis and the latter were reported to have "assured to take appropriate steps" to address the same. During last seven months of the current fiscal until January 2010, fiscal year the industry lost $606.36 million in exports, representing a drop of 7.0% on a year on year basis. The power crisis has reportedly compelled BKMEA member units to halt regular production in Dhaka, Chittagong, Gazipur, Savar and Narayangonj. Such units failed to gain even 50% of the targeted production level and the industry leaders are apprehensive whether the export target of $7297.21 billion set for this sector this fiscal would at all be achieved. They have sought direct and prompt initiatives/directives form the Prime Minister to improve the power situation on a 'fast track" basis.
In addition to the loss of revenue and exports, there is a looming danger/threat of losing buyers due to delayed shipments/failed shipments. This will not only adversely impact the export earnings but also create unemployment as factories would be compelled to lay off workers in the absence of orders. Then, this might trigger labour unrest and chaos in this organised sector. The other industrial, agriculture and service sectors are also impacted and are burdened with a large amount of losses in revenues and employment.
While inaugurating a power plant in Fenchugonj, the Prime Minister had earlier recognised the power sector as being the driving force for the development of the country. However, the stark reality shows a very dismal scenario. Aside from 'adhoc" measures to mitigate the emergent crisis, there is yet no sign of any effective planning with specific goals and objectives within a time-bound roadmap backed by appropriate/investor friendly policies and strategies to address the problems in power sector. This has led to shying away of some potential investors from Bangladesh. All we hear now from the government dignitaries are only lofty/vague statements having no relevance to reality.
About the existing policies pertaining to the power sector, it may be noted that the government of Bangladesh (GoB) adopted in 1996 the Private Sector Power Generation Policy (PSPGP) to promote private sector participation in generation of electricity with a view to promoting economic growth. Subsequently, through a document titled "Policy Guidelines for Enhancement of Private Participation in the Private sector, 2008" the GoB encouraged public private partnership (PPP) and allowed the private sector to (1) set up commercial power plants and (2) to supply electricity to the distribution licensees at tariff rates determined by the Bangladesh Energy Regularity Commission (BERC). Until recently the original draft PPP policy was subjected to incorporation of various provisions. But it still contains a number of anomalies. There are some provisions which are questionable and would encourage corruption and financial irregularities, some experts have noted.
The draft policy has recently been submitted by the Board of Investments (BoI) to the Cabinet Division for approval. There is yet no 'approved' PPP policy in place. Rather an "adhoc" one exists. Once approved would be gazetted and would be the official document for prospective investors. However, if the draft is approved with all the provisions proposed by the Prime Minister's Office (PMO) it would deter private participation. The delay in approval of the PPP policy, along with the proposed provisions, will keep the power sector in a limbo to the detriment of all quarters. This will adversely affect the Nation's ability to encourage industrialisation and progress.
In order for Bangladesh to get out of this dismal situation that currently exists in the power sector, certain pragmatic/immediate steps should be taken by the GoB under the direct oversight of the Prime Minister. Some such measures can be enumerated here:
A) Allow any existing industrial unit/units/groups/clusters of factories or manufacturing facilities to import power generation plants for their own establishments based on diesel, HFO up to generating capacities of five MW to 50MW; these plants are widely known as TPS (temporary power solution) plants and could be set up within a six month time cycle, provided land and appropriate permits are in place and are available on a two to five years' rental basis with an option to transfer (Build, Own and Transfer or BOT) as well. The electricity generated could then be transferred to the concerned utilities grids of the area for "wheeling"/ distribution. Hence appropriate modalities/ arrangements would need to be worked out with the concerned utilities ( BPDB/ DESA/REB) with the full backing/approval of the Energy Ministry/BERC.
B) Any existing levies/duties/ charges on these diesel/HFO-powered plants that are to be imported on a "returnable" basis, should not be imposed/applied. Naturally, appropriate checks and balances would have to be in place to avoid any misuse of the intended purpose. Such measures will enable to, at least, carry out the production by the industrial units which currently are now being hampered.
C) Ensure timely completion of the approved power projects if necessary through monitoring by special "Task Forces" of the approving Ministry.
D) Accelerate the bidding processes and issuance of work orders for projects that are currently in the pipeline and these should be put under a monitoring system as stated above.
E) Aggressively solicit support from countries/investors who are willing to set up large power plants through the use of non-gas options i.e. diesel, HFO, pet coke-based on the adhoc PPP policy. In this connection, the Bangladesh embassies, high commissions, consulates, trade offices etc., located in various countries abroad, should be activated to identify appropriate parties including non-resident Bangladeshis, supported by well orchestrated "road shows"
F) An international conference on "Power & Energy" should be convened in Dhaka immediately inviting all spectrum of stakeholders connected with the power and energy sectors. This should preferably be handled by world renowned event management companies/managers in this field. The outcome of this event, if properly managed and participated by professionals/experts, would open up doors for seeking solutions, in the medium to long term periods. This will enable the policy-makers to strategies for the next 10-15 years and in our view would be the key to achieving the "millennium development goals" and usher in a Bangladesh to a new league in the comity of nations among the middle income earning nation. We are confident the present government under the leadership of our Prime Minister with a determined and focused agenda can achieve this goal.
The writer writes from Jeddah, Kingdom of Saudi Arabia. He can be reached at e-mail:
amanullah.ullah5@gmail.com
BANGLADESH'S power sector has, of late, been in the news, talkshows and not to mention in family gossips creating an atmosphere of helplessness and despair to the extent that the people without electricity, water have joined in street protests.
If we analyse the situation starting with the actual capacity -- installed capacity of the country now stands at 6005MW (with the recently installed 51MW plant in Fenchugonj) from 354 units in 44 power stations having an average generation of 3700MW against an estimated demand of for 7000MW -- and if we factor in the 15% system loss caused by faulty lines and conditions of plants that have outlived their useful lives, the power generation figure will be even less. Out of the 6005MW installed capacity, 18 plants varying in sizes from 10MW to 90MW generating 624MW were installed during the periods April, 2008 and June 2009 and a large number of such plants were on 3-15 years rental leases.
Bangladesh Power Development Board (BPDB) is responsible for distribution of electricity in most of the areas in Bangladesh except Dhaka Metropolitan City and its adjoining areas under DESA and DESCO, areas under West Zone Power Distribution Company Ltd (WZPDCL) and some of the rural areas under Rural Electrification Board (REB).
At present only 47% of the population is served with electricity and the per capita electricity consumption is only 156Kwh (fiscal-2009) which is one of the lowest in the world.
In order to mitigate the demand shortfall, the present Government has, as the reports said, recently taken the following measures:-
1) Approved a project to build ten "peaking power plants" costing Tk72.03 billion (7203 crore) which will produce 830MW of power by end 2011.
2) Approved a project costing Tk 10.25 billion (1025 crore) to modify and renovate the units #3,4 and 5 of the Ashugonj Power Plant Complex which were built in the late 70's and early 80's.
3) Approved bids of two companies for four power plants of a combined capacity of 270MW which will use furnace oil and will come on stream by June 2011.
In addition to the above, concrete steps and some intervening measures have been/are being, taken. These include:
1) Importing LNG from Qatar to offset the gas shortage;
2) Actively considering installing nuclear power plants through Russian assistance which involve a time span of over 10 years for building;
3) Importing electricity from India, Nepal, Bhutan and Myanmar;
4) Erection of transmission lines from Bahrampur in West Bengal to Bheramara in Kushtia to allow importation of 250MW of electricity from India;
5) Shutting down some fertiliser factories and diverting gas for power generation;
6) Rationing the use of air conditioners in private homes/offices; and,
7) Encouraging use of alternate sources of energy i.e. solar energy, bio-fuel etc.
The power shortages have impacted significantly the industrial sector and the apparel/RMG sector is the worst affected one. Data available from the Research Cell of BGMEA indicates that due to actual "load shedding", the loss to the apparel/RMG sector is around Tk. 3902 million by way of lost revenue and exports and the cost of generating power through own generators during the load shedding period totals around Tk. 6131 million. The leaders of the apparel industry -- Bangladesh Garments Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) met the Prime Minister's Energy Adviser and the State Minister for Power on March 16 last to highlight the crisis and the latter were reported to have "assured to take appropriate steps" to address the same. During last seven months of the current fiscal until January 2010, fiscal year the industry lost $606.36 million in exports, representing a drop of 7.0% on a year on year basis. The power crisis has reportedly compelled BKMEA member units to halt regular production in Dhaka, Chittagong, Gazipur, Savar and Narayangonj. Such units failed to gain even 50% of the targeted production level and the industry leaders are apprehensive whether the export target of $7297.21 billion set for this sector this fiscal would at all be achieved. They have sought direct and prompt initiatives/directives form the Prime Minister to improve the power situation on a 'fast track" basis.
In addition to the loss of revenue and exports, there is a looming danger/threat of losing buyers due to delayed shipments/failed shipments. This will not only adversely impact the export earnings but also create unemployment as factories would be compelled to lay off workers in the absence of orders. Then, this might trigger labour unrest and chaos in this organised sector. The other industrial, agriculture and service sectors are also impacted and are burdened with a large amount of losses in revenues and employment.
While inaugurating a power plant in Fenchugonj, the Prime Minister had earlier recognised the power sector as being the driving force for the development of the country. However, the stark reality shows a very dismal scenario. Aside from 'adhoc" measures to mitigate the emergent crisis, there is yet no sign of any effective planning with specific goals and objectives within a time-bound roadmap backed by appropriate/investor friendly policies and strategies to address the problems in power sector. This has led to shying away of some potential investors from Bangladesh. All we hear now from the government dignitaries are only lofty/vague statements having no relevance to reality.
About the existing policies pertaining to the power sector, it may be noted that the government of Bangladesh (GoB) adopted in 1996 the Private Sector Power Generation Policy (PSPGP) to promote private sector participation in generation of electricity with a view to promoting economic growth. Subsequently, through a document titled "Policy Guidelines for Enhancement of Private Participation in the Private sector, 2008" the GoB encouraged public private partnership (PPP) and allowed the private sector to (1) set up commercial power plants and (2) to supply electricity to the distribution licensees at tariff rates determined by the Bangladesh Energy Regularity Commission (BERC). Until recently the original draft PPP policy was subjected to incorporation of various provisions. But it still contains a number of anomalies. There are some provisions which are questionable and would encourage corruption and financial irregularities, some experts have noted.
The draft policy has recently been submitted by the Board of Investments (BoI) to the Cabinet Division for approval. There is yet no 'approved' PPP policy in place. Rather an "adhoc" one exists. Once approved would be gazetted and would be the official document for prospective investors. However, if the draft is approved with all the provisions proposed by the Prime Minister's Office (PMO) it would deter private participation. The delay in approval of the PPP policy, along with the proposed provisions, will keep the power sector in a limbo to the detriment of all quarters. This will adversely affect the Nation's ability to encourage industrialisation and progress.
In order for Bangladesh to get out of this dismal situation that currently exists in the power sector, certain pragmatic/immediate steps should be taken by the GoB under the direct oversight of the Prime Minister. Some such measures can be enumerated here:
A) Allow any existing industrial unit/units/groups/clusters of factories or manufacturing facilities to import power generation plants for their own establishments based on diesel, HFO up to generating capacities of five MW to 50MW; these plants are widely known as TPS (temporary power solution) plants and could be set up within a six month time cycle, provided land and appropriate permits are in place and are available on a two to five years' rental basis with an option to transfer (Build, Own and Transfer or BOT) as well. The electricity generated could then be transferred to the concerned utilities grids of the area for "wheeling"/ distribution. Hence appropriate modalities/ arrangements would need to be worked out with the concerned utilities ( BPDB/ DESA/REB) with the full backing/approval of the Energy Ministry/BERC.
B) Any existing levies/duties/ charges on these diesel/HFO-powered plants that are to be imported on a "returnable" basis, should not be imposed/applied. Naturally, appropriate checks and balances would have to be in place to avoid any misuse of the intended purpose. Such measures will enable to, at least, carry out the production by the industrial units which currently are now being hampered.
C) Ensure timely completion of the approved power projects if necessary through monitoring by special "Task Forces" of the approving Ministry.
D) Accelerate the bidding processes and issuance of work orders for projects that are currently in the pipeline and these should be put under a monitoring system as stated above.
E) Aggressively solicit support from countries/investors who are willing to set up large power plants through the use of non-gas options i.e. diesel, HFO, pet coke-based on the adhoc PPP policy. In this connection, the Bangladesh embassies, high commissions, consulates, trade offices etc., located in various countries abroad, should be activated to identify appropriate parties including non-resident Bangladeshis, supported by well orchestrated "road shows"
F) An international conference on "Power & Energy" should be convened in Dhaka immediately inviting all spectrum of stakeholders connected with the power and energy sectors. This should preferably be handled by world renowned event management companies/managers in this field. The outcome of this event, if properly managed and participated by professionals/experts, would open up doors for seeking solutions, in the medium to long term periods. This will enable the policy-makers to strategies for the next 10-15 years and in our view would be the key to achieving the "millennium development goals" and usher in a Bangladesh to a new league in the comity of nations among the middle income earning nation. We are confident the present government under the leadership of our Prime Minister with a determined and focused agenda can achieve this goal.
The writer writes from Jeddah, Kingdom of Saudi Arabia. He can be reached at e-mail:
amanullah.ullah5@gmail.com