No magic wand for the beleaguered energy sector
Shahiduzzaman Khan | Sunday, 15 June 2008
FINANCE Adviser Dr Mirza Azizul Islam, in his budget speech, did not bring any magic wand for the country's beleaguered energy sector. What was expected from him that he would draw a battle line in order to boost the country's energy sector by announcing a series of action programme. But the proposed budget lacks that sense of direction.
In reality, the finance adviser declared that Bangladesh Petroleum Exploration Company (BAPEX) would be provided with Tk 32 billion over the next seven years to strengthen its exploration programme. He said since the country's current gas reserve of 7.86 trillion cubic feet (tcf) will be depleted to a precarious level by 2011, the government has put in place this investment plan for exploration of oil and gas.
However, Mirza Azizul Islam proposed an allocation of Tk 43.40 billion for power and energy sector in the budget, which is 4.3 percent of the proposed total budget and 21 percent higher than the revised allocation in the current fiscal year. He said the government would shortly declare a national coal policy. International Atomic Energy Agency (IAEA) has agreed to support the proposed Rooppur Nuclear Power Generation Plant. Shortly, IAEA will field a mission to Bangladesh. Efforts are also underway to generate electricity from coal and renewable coal energy.
The adviser claimed that power shortfall was just 900 megawatt (MW). Daily power requirement was 4,500 MW against the average net generation of 3,600 MW. But, according to the Power System Master Plan (PSMP), the demand for power would be 5,569 MW this year, leaving a constant deficit of almost 2,000 MW. Indeed, the adviser's speech did not guarantee any improvement in power supply this year. He said nothing about what the nation would do to address power crisis in 2009, though he shed some light about the power situation in 2010.
According to what the finance adviser claimed, a total of 124 MW from public and private sector has been added to the national power grid in the current fiscal year. Another 210 MW will be added by June 2008. By December 2008, a total of 320 MW power will be generated on a rental basis in the private sector and 10 small power producers will generate another 166 MW. An agreement has been signed with captive power plants to purchase 27 MW of electricity, of which 10 MW has already been put into the grid. To meet the emergency, power generation has been raised by 318 MW, renovating the old power plants. In spite of all these efforts, inadequate gas supply disrupted normal power generation.
The adviser, however, did not disagree about the pitiable power consumption situation in the country. Although currently 43 percent of our total population enjoys electricity facility, the per capita electricity consumption is low compared to many developing countries. In 2007, country's per capita electricity consumption stood at 140 KWH while it was 325 KWH in Sri Lanka, 408 KWH in Pakistan and 665 KWH in India.
He claimed that four private power plants with a total of 450 MW capacity -- now being built -- will come into operation by 2010, and three public sector plants with 380 MW capacity are also being constructed. But according to the Power Division, presently no private power plant is being built. The Power Cell of the ministry is floating tender for two 450 MW power projects, and it is far from awarding the contracts.
Power Division sources, however, said some public sector power projects are now under implementation. Siddhirganj 240 MW power project will come into operation within a few months while the authorities are expected to award contracts for a 150 MW power project in Sikalbaha and a 360 MW one in Haripur within this year.
The adviser pointed out that presently 75 percent of the nation's commercial energy requirement is met from natural gas resources, and the remaining by importing petroleum, and generating hydro-power and thermal power at Barapukuria. Barapukuria mine is supplying coal to the 250 MW coal-fired power plants there while production has started in Madhyapara Hardrock Mine. Petrol, diesel and liquefied petroleum gas are being produced in processing plants at Kailashtila and Biyanabazar. Efforts are continuing to save foreign exchange by increasing the use of compressed natural gas (CNG).
In fact, all is not well with the country's energy sector. Bangladesh needs to invest at least US$ 18 billion in this sector by 2025 to make the power generation sufficient for consumption of the people and industrial units. Of the total, at least $10 billion worth of investment will be needed for raising the country's power generation to 17000MW and expanding its distribution systems while another $8.0 billion will be required to explore for additional 24 TCF of natural gas by the said period.
A private-public partnership is essential for pumping a total investment worth of $18 billion for coping with the country's growing demand for power and natural gas until the year 2025. However, there is a need for exploring more gas from new reserves and searching for alternative sources of energy for ensuring the country's long-term energy security.
There is denying that the country's power sector is in a very bad shape due to rampant corruption, which is badly affecting private sector growth and investment climate. The World Bank (WB) recently warned that the country's future growth might slow down if the problems in the power sector could not be resolved urgently. The WB, which has taken a tough stance on governance and corruption, said its future assistance would depend on the improvement of governance that includes reducing corruption.
It is worthwhile to mention unless energy sector grows in a planned way, economic development of the country is bound to hamper. If one industry remains closed for some reasons, a section of the people associated with the production and sales of the products are affected. But if a power plant remains closed for some reasons or power plants are not taken up for timely addition to meet the rapidly growing demand, the whole gamut of industrial and commercial activities are affected.
Due to high dependency on foreign loan for the development of power sector followed by chronic systems loss and poor management, power supply situation continued to deteriorate. Some age-old power plants were in the process of rehabilitation in order to regain the lost capacity and to avoid complete shut down. Due to the unilateral decision of the donors, the age-old power plants could not be rehabilitated and new projects could not be taken up to meet the growing demand of the system.
As the power crisis was gripping the country, a good step was thought to make a breakthrough to minimise the power crisis through import of power through cross border power trade. Eastern part of India had surplus generation capacity, on the other hand, western side of Bangladesh had serious shortfall. Asian Development Bank (ADB) was also interested to finance the cross border transmission system development without any precondition. A committee was formed with the directive of the ministry to study about the import of power from eastern part of neighbouring India. There were exchange of visits between India and Bangladesh. However, after 1995 the study could not proceed further due to political disturbance in Bangladesh.
Inspite of the finance adviser's lukewarm response to huge demands of the energy sector, the government must go for a short-term solution first, and then prepare for a long-term strategic plan for the energy sector. Overhauling of the closed power plants should be done as soon as possible and independent and rental power plants should be encouraged to generate electricity without any hesitation.
................................................................
szkhan@thefinancialexpress-bd.com
In reality, the finance adviser declared that Bangladesh Petroleum Exploration Company (BAPEX) would be provided with Tk 32 billion over the next seven years to strengthen its exploration programme. He said since the country's current gas reserve of 7.86 trillion cubic feet (tcf) will be depleted to a precarious level by 2011, the government has put in place this investment plan for exploration of oil and gas.
However, Mirza Azizul Islam proposed an allocation of Tk 43.40 billion for power and energy sector in the budget, which is 4.3 percent of the proposed total budget and 21 percent higher than the revised allocation in the current fiscal year. He said the government would shortly declare a national coal policy. International Atomic Energy Agency (IAEA) has agreed to support the proposed Rooppur Nuclear Power Generation Plant. Shortly, IAEA will field a mission to Bangladesh. Efforts are also underway to generate electricity from coal and renewable coal energy.
The adviser claimed that power shortfall was just 900 megawatt (MW). Daily power requirement was 4,500 MW against the average net generation of 3,600 MW. But, according to the Power System Master Plan (PSMP), the demand for power would be 5,569 MW this year, leaving a constant deficit of almost 2,000 MW. Indeed, the adviser's speech did not guarantee any improvement in power supply this year. He said nothing about what the nation would do to address power crisis in 2009, though he shed some light about the power situation in 2010.
According to what the finance adviser claimed, a total of 124 MW from public and private sector has been added to the national power grid in the current fiscal year. Another 210 MW will be added by June 2008. By December 2008, a total of 320 MW power will be generated on a rental basis in the private sector and 10 small power producers will generate another 166 MW. An agreement has been signed with captive power plants to purchase 27 MW of electricity, of which 10 MW has already been put into the grid. To meet the emergency, power generation has been raised by 318 MW, renovating the old power plants. In spite of all these efforts, inadequate gas supply disrupted normal power generation.
The adviser, however, did not disagree about the pitiable power consumption situation in the country. Although currently 43 percent of our total population enjoys electricity facility, the per capita electricity consumption is low compared to many developing countries. In 2007, country's per capita electricity consumption stood at 140 KWH while it was 325 KWH in Sri Lanka, 408 KWH in Pakistan and 665 KWH in India.
He claimed that four private power plants with a total of 450 MW capacity -- now being built -- will come into operation by 2010, and three public sector plants with 380 MW capacity are also being constructed. But according to the Power Division, presently no private power plant is being built. The Power Cell of the ministry is floating tender for two 450 MW power projects, and it is far from awarding the contracts.
Power Division sources, however, said some public sector power projects are now under implementation. Siddhirganj 240 MW power project will come into operation within a few months while the authorities are expected to award contracts for a 150 MW power project in Sikalbaha and a 360 MW one in Haripur within this year.
The adviser pointed out that presently 75 percent of the nation's commercial energy requirement is met from natural gas resources, and the remaining by importing petroleum, and generating hydro-power and thermal power at Barapukuria. Barapukuria mine is supplying coal to the 250 MW coal-fired power plants there while production has started in Madhyapara Hardrock Mine. Petrol, diesel and liquefied petroleum gas are being produced in processing plants at Kailashtila and Biyanabazar. Efforts are continuing to save foreign exchange by increasing the use of compressed natural gas (CNG).
In fact, all is not well with the country's energy sector. Bangladesh needs to invest at least US$ 18 billion in this sector by 2025 to make the power generation sufficient for consumption of the people and industrial units. Of the total, at least $10 billion worth of investment will be needed for raising the country's power generation to 17000MW and expanding its distribution systems while another $8.0 billion will be required to explore for additional 24 TCF of natural gas by the said period.
A private-public partnership is essential for pumping a total investment worth of $18 billion for coping with the country's growing demand for power and natural gas until the year 2025. However, there is a need for exploring more gas from new reserves and searching for alternative sources of energy for ensuring the country's long-term energy security.
There is denying that the country's power sector is in a very bad shape due to rampant corruption, which is badly affecting private sector growth and investment climate. The World Bank (WB) recently warned that the country's future growth might slow down if the problems in the power sector could not be resolved urgently. The WB, which has taken a tough stance on governance and corruption, said its future assistance would depend on the improvement of governance that includes reducing corruption.
It is worthwhile to mention unless energy sector grows in a planned way, economic development of the country is bound to hamper. If one industry remains closed for some reasons, a section of the people associated with the production and sales of the products are affected. But if a power plant remains closed for some reasons or power plants are not taken up for timely addition to meet the rapidly growing demand, the whole gamut of industrial and commercial activities are affected.
Due to high dependency on foreign loan for the development of power sector followed by chronic systems loss and poor management, power supply situation continued to deteriorate. Some age-old power plants were in the process of rehabilitation in order to regain the lost capacity and to avoid complete shut down. Due to the unilateral decision of the donors, the age-old power plants could not be rehabilitated and new projects could not be taken up to meet the growing demand of the system.
As the power crisis was gripping the country, a good step was thought to make a breakthrough to minimise the power crisis through import of power through cross border power trade. Eastern part of India had surplus generation capacity, on the other hand, western side of Bangladesh had serious shortfall. Asian Development Bank (ADB) was also interested to finance the cross border transmission system development without any precondition. A committee was formed with the directive of the ministry to study about the import of power from eastern part of neighbouring India. There were exchange of visits between India and Bangladesh. However, after 1995 the study could not proceed further due to political disturbance in Bangladesh.
Inspite of the finance adviser's lukewarm response to huge demands of the energy sector, the government must go for a short-term solution first, and then prepare for a long-term strategic plan for the energy sector. Overhauling of the closed power plants should be done as soon as possible and independent and rental power plants should be encouraged to generate electricity without any hesitation.
................................................................
szkhan@thefinancialexpress-bd.com