The proposed budget for the fiscal 2015-16 has been placed in parliament with the goal of attaining higher growth. The business community reacted positively as they considered the budget 'business- and investment-friendly'. Leading economists of the country, however, question whether achieving the targeted revenues for implementing development programmes would be possible. The economists identify, among others, poor fiscal planning, poor revenue generation, sluggish private investment and poor utilisation of concessional financing including project aid as the major challenges for attaining the budget targets. Moreover, the State Minister for Planning and Finance M A Mannan identified lack of prioritisation as a weakness in the budget. He further said that the 'budget is hugely misused in Bangladesh' and the phenomenon had been 'systematic'. Under these circumstances, the targets for successful implementation of energy sector projects are subject to adequate budget allocations for efficient implementation. The proposed budget has the allocation of Tk 185.40 billion for the Ministry of Power, Energy and Mineral Resources for the fiscal 2015-16. The allocation is hardly adequate for attaining the targets.
Energy and mineral resources have two interlinked areas -- primary energy and secondary energy. Bangladesh energy sector has been heavily reliant on natural gas. Electricity generation targets, so far, are mainly dependent on the availability of natural gas. As the natural gas reserves are depleting fast, the government has said in the proposed budget for 2015-2016 that it needs to finalise programmes within 2015 for the installation of power plants in the country, making coal the prime fuel for the plants. In the meantime, the government has decided to commence implementation of the Seventh Five Year Plan from July 2015. Among others, the government's target includes overcoming the limitations of the capacity for power, energy and communication infrastructure. Also, the government targets to secure distribution of 80 per cent of generated power to the customers by 2018. The present installed power generation capacity of 13,675 MW (including captive power of 2000 MW and 175 MW form all existing Solar Home Systems) cannot be fully utilised mainly due to deficiencies in the transmission and distribution infrastructure. Until 2014, approximately 16.20 million consumers have received access to electricity in the country. But the government's vision statement for 2021 targets electricity for all which will require installation of additional 10,000km transmission and 1,50,000km distribution lines in the country. It is unlikely that the private sector will implement any part of the transmission and distribution lines for electricity.
Similarly, for attaining the targets for adequate volume of electricity, a large number of baseline power plants will be required to be installed and made functional. These power generation projects will require massive investments. The already identified 1,320MW Rampal coal-fired power plant, 1,200MW Matarbari coal-fired power plant, 1,200MW Maheshkhali coal-fired power plant and 1,320MW Patuakhali (Paira) power plants, 2,000MW Rooppur Nuclear Power Plant will require huge government investments for their timely implementation. Among the identified baseline power plants, only Matarbari coal-fired power plant has secured JICA loans under specific agreements. Potential investors from China, Malaysia, South Korea and Singapore have been showing interest to provide loan or to become financing partners for the proposed Maheshkhali and Paira (Patuakhali) power plants. However, overseas loans or FDI (foreign direct investment) involvements will not fully waive the government's financial involvement for these projects.
The government's eight fast-track projects include Rampal coal-fired power plant, LNG terminal building, Matarbari coal-fired power plant project and Rooppur nuclear power plant project. Among these four projects, Matarbari coal-fired project has so far obtained assurance regarding JICA's financial assistance; Rooppur nuclear plant's main contract is in the phase of negotiations and the loan terms are yet to be finalised with Russia. The remaining two projects still have to secure investment sources.
The government has set target for generating 2000MW electric energy from renewable sources including 500MW from solar energy. Also, there is a set target for importing 600MW power within the shortest possible time from India. The renewable energy development projects and import of electricity will require massive public spending.
Presently, 29 per cent of the country's electricity generation is reliant on imported liquid fuel. The shrinking gas supply will increase the country's demand for oil imports. Petroleum import positively impacts on the state-owned Bangladesh Petroleum Corporation (BPC) since domestic petroleum price adjustment is not linked to international petroleum market prices. But the growing reliance on imported fuels will ask for increased budget allocation for BPC and Coal Power Generation Company under the Ministry of Power, Energy and Mineral Resources.
The low budget allocations for power and energy sector will, on the one hand, obstruct implementation of much-needed projects. This will ultimately challenge the growth of the economy. On the other hand, government's limited revenue earnings cannot meet the growing demands for the sector's development. So, it has little choice but to work on improving investor confidence to attract more private investment in this sector.
The writer, a mining engineer, writes on energy and
environment issues. mushfiq41@yahoo.com
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