Power sector irregularities: Tasks ahead
Thursday, 22 November 2007
Shahiduzzaman Khan
Irregularities and mismanagement in the power sector caused the country to lose Tk 106.26 billion in the last fiscal alone. A staggering amount of Tk 189.30 billion was lost during 1994-05 due to distribution loss and pilferage of electricity.
A recent study conducted by the Transparency International, Bangladesh (TIB) on power sector, published in the FE this week, identified absence of transparency and accountability, irregularities in procurement and distribution, massive supply shortage, inefficiency in financial management, high technical and distribution loss, unsatisfactory services to clients and harassment of clients by the staff as key factors that are troubling the country's power sector.
The study revealed that Bangladesh also counted a loss of Tk 40.07 billion during 1996 to 2005 through purchasing six overpriced power plants and unnecessarily appointing a foreign company for their maintenance. In 2005-06, voltage fluctuation and electricity shortage caused industries of the country a production loss of Tk 83.55 billion. Linemen, collective bargaining agency (CBA) leaders, storekeepers and superintendents harassed around 27 per cent prospective clients for bribe.
The power shortage forced 90 per cent of readymade garment manufacturers to use diesel-run generators. As a result, manufacturing cost in 2005-06 was increased by 5.0 per cent, causing a loss of Tk 2.90 billion. Shortage of electricity caused 1.0 per cent loss to the gross domestic product (GDP) in the last fiscal. Besides, excessive systems loss caused the Power Development Board (PDB) to incur a loss of Tk 2.10 billion while the figure was Tk 4.40 billion for DESA.
To meet 8000MW of power demand in 2010, around Tk 170 billion of investment is required in the sector and the public organisations in the sector do not have the capacity to achieve that goal. Only 37 to 40 per cent of the power plants are capable of generating 85 to 90 per cent power. In fact, corrupt practices by a section of officials in the sector and their lack of accountability and political interventions in the decision-making process led to today's crisis.
Indeed, Bangladesh's power sector went through much debates and discussions since 2001, but no effective steps were taken for its improvement although demand has persistently grown by about 10 per cent per year. Mismanagement and shortsightedness pushed the sector to near collapse.
The current peak demand for power is about 5,200 MW, against an available supply of about 3,500 MW. Of the total 97 power units about 30 are over 20 years old, resulting in lower production capacity. This means that the capacity of the public sector producers is diminishing day by day due to plant age, improper maintenance and unavailability of funds for capacity addition.
According to the Power System Master Plan (PSMP), the base load demand for electricity will be about 7,000 MW by 2011, and by that time about 600 MW of present generation capacity may become unusable. According to estimates, an additional 5,000 MW needs to be added, but the process has to start right now because it takes a minimum of about two years for a plant to go into commercial operation from the time of bidding.
The task of adding 5,000 MW is not impossible. Bangladesh has a good independent power plant (IPP) model in place, and sufficient feedstock backed by demand for power. The country must look for renewable energy sources. The infrastructure Development Company Limited (IDCOL) launched 100,000 solar home systems in the rural areas through non-government organisations (NGOs). The IDCOL provides both grant and loans to the NGOs for the purpose. Such example can be replicated in other parts of the country.
The government is currently examining the possibility of producing power in Myanmar and bringing it to Bangladesh. Myanmar would require Bangladesh to supply 30 per cent of the generated power to the consumers of Myanmar, which will leave 70 per cent for Bangladesh. This will require cross-border transmission lines, and the whole process will take several years to complete. Potential political risks of such initiatives merit here a close scrutiny. A regional power grid to transmit power from surplus segments to deficit ones should be actively explored, including an access to regional power trade.
There is no 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 high time that the country moves forward with precision for solutions to its long-lingering problems in the power sector. To check irregularities and mismanagement in the sector, an ombudsman should be appointed for the power sector. Transparent rules should be formulated so that all documents of major procurements and accounts are made public. An independent committee should be entrusted to review such documents.
Political intervention in the distribution process must end. Honest and competent officials and employees should be engaged in the power sector. An independent authority should be entrusted with the responsibility of implementing the power sector's 'Vision 2025' programme. Successive governments in the past have failed to give the highest priority to power sector and provide clear guideline to assess the required supply of electricity against demand. This is time that the present caretaker government has been giving top priority to the sector and trying to ensure power supply to meet the consumer demand.
Irregularities and mismanagement in the power sector caused the country to lose Tk 106.26 billion in the last fiscal alone. A staggering amount of Tk 189.30 billion was lost during 1994-05 due to distribution loss and pilferage of electricity.
A recent study conducted by the Transparency International, Bangladesh (TIB) on power sector, published in the FE this week, identified absence of transparency and accountability, irregularities in procurement and distribution, massive supply shortage, inefficiency in financial management, high technical and distribution loss, unsatisfactory services to clients and harassment of clients by the staff as key factors that are troubling the country's power sector.
The study revealed that Bangladesh also counted a loss of Tk 40.07 billion during 1996 to 2005 through purchasing six overpriced power plants and unnecessarily appointing a foreign company for their maintenance. In 2005-06, voltage fluctuation and electricity shortage caused industries of the country a production loss of Tk 83.55 billion. Linemen, collective bargaining agency (CBA) leaders, storekeepers and superintendents harassed around 27 per cent prospective clients for bribe.
The power shortage forced 90 per cent of readymade garment manufacturers to use diesel-run generators. As a result, manufacturing cost in 2005-06 was increased by 5.0 per cent, causing a loss of Tk 2.90 billion. Shortage of electricity caused 1.0 per cent loss to the gross domestic product (GDP) in the last fiscal. Besides, excessive systems loss caused the Power Development Board (PDB) to incur a loss of Tk 2.10 billion while the figure was Tk 4.40 billion for DESA.
To meet 8000MW of power demand in 2010, around Tk 170 billion of investment is required in the sector and the public organisations in the sector do not have the capacity to achieve that goal. Only 37 to 40 per cent of the power plants are capable of generating 85 to 90 per cent power. In fact, corrupt practices by a section of officials in the sector and their lack of accountability and political interventions in the decision-making process led to today's crisis.
Indeed, Bangladesh's power sector went through much debates and discussions since 2001, but no effective steps were taken for its improvement although demand has persistently grown by about 10 per cent per year. Mismanagement and shortsightedness pushed the sector to near collapse.
The current peak demand for power is about 5,200 MW, against an available supply of about 3,500 MW. Of the total 97 power units about 30 are over 20 years old, resulting in lower production capacity. This means that the capacity of the public sector producers is diminishing day by day due to plant age, improper maintenance and unavailability of funds for capacity addition.
According to the Power System Master Plan (PSMP), the base load demand for electricity will be about 7,000 MW by 2011, and by that time about 600 MW of present generation capacity may become unusable. According to estimates, an additional 5,000 MW needs to be added, but the process has to start right now because it takes a minimum of about two years for a plant to go into commercial operation from the time of bidding.
The task of adding 5,000 MW is not impossible. Bangladesh has a good independent power plant (IPP) model in place, and sufficient feedstock backed by demand for power. The country must look for renewable energy sources. The infrastructure Development Company Limited (IDCOL) launched 100,000 solar home systems in the rural areas through non-government organisations (NGOs). The IDCOL provides both grant and loans to the NGOs for the purpose. Such example can be replicated in other parts of the country.
The government is currently examining the possibility of producing power in Myanmar and bringing it to Bangladesh. Myanmar would require Bangladesh to supply 30 per cent of the generated power to the consumers of Myanmar, which will leave 70 per cent for Bangladesh. This will require cross-border transmission lines, and the whole process will take several years to complete. Potential political risks of such initiatives merit here a close scrutiny. A regional power grid to transmit power from surplus segments to deficit ones should be actively explored, including an access to regional power trade.
There is no 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 high time that the country moves forward with precision for solutions to its long-lingering problems in the power sector. To check irregularities and mismanagement in the sector, an ombudsman should be appointed for the power sector. Transparent rules should be formulated so that all documents of major procurements and accounts are made public. An independent committee should be entrusted to review such documents.
Political intervention in the distribution process must end. Honest and competent officials and employees should be engaged in the power sector. An independent authority should be entrusted with the responsibility of implementing the power sector's 'Vision 2025' programme. Successive governments in the past have failed to give the highest priority to power sector and provide clear guideline to assess the required supply of electricity against demand. This is time that the present caretaker government has been giving top priority to the sector and trying to ensure power supply to meet the consumer demand.