Bangladesh Power Development Board (PDB) has become dependent on rental and quick rental power plants. Because of the failure of big power projects to develop, PDB has to remain tied to rental and quick rentals for at least another six years. Contracts are being renewed with these power plants mainly because of lack of alternatives. The government took a decision in principle at the end of its previous term not to renew such contracts, but now the decision has been changed. Meanwhile, ten contracts have been extended, and the remaining plants are awaiting extension.
In the last four years the government had to pay about Tk 210 billion as subsidy for buying electricity from the rental and quick rental plants at a high price. These plants have now the capacity to produce 10,000 mw of power. A government committee has recommended continuation of the rentals until 2020.
It is alleged that there is planned plundering behind buying power from the rentals while the construction of government power stations is on hold. Because of fire and closure of the 3 units of gas based 450mw power station at Meghnaghat, the demand for rentals has gone up. The prevailing heat wave in the country has also sparked increased demand for power lately. Power is now purchased from the rentals at high price.
The cause of fire at Meghnaghat power plant is not yet known. An expert team from Malaysia is due to arrive to enquire into the fire incident. One source has indicated that burning of the three units of the modern plant is mysterious. The power station had all the required devises to control fire. It is not understood why these devices were not been used. It is necessary to find out who are involved with this incident and who the beneficiaries are. It is also necessary to find out if this incident is connected with the extension of the rentals.
During the last one year PDB (Power Development Board) purchased 6.48 billion units of power from the rental plants. As against this, the expenditure stood at Tk 83.96 billion. Per unit cost of production was Tk 12.96. It was sold at Tk 4.70 per unit. On this count, PDB had to incur a loss of Tk 59.51 billion. PDB thought that if most of the rental and quick rentals were closed in this financial year, losses would come down. But because of the extension of most of the rentals and quick rentals, losses would exceed Tk 70.billion.
In 2011-12, PDB lost Tk 63.50 billion in buying power from the rentals. This loss was estimated at Tk 51.70 billion to Tk 55 billion in the following two years. PDB sources say that during the last tenure of the government, 9 furnace oil, 5 gas and 3 diesel-run quick rentals came into operation. Their rent ranged from Tk 31.95 billion to Tk 35 billion and fuel cost from Tk 55 billion to Tk 60 billion.
The government plan to reduce subsidy may not work because of extension of rentals. Role of private sector is increasing in the power sector. Currently, 52 per cent of power is coming from the private sector. PDB would be able to reduce loss if the government power projects are made operational.
The government has decided to allow the private oil-fired power plant owners to import furnace oil without prior permission from Bangladesh Petroleum Corporation (BPC). In so done, the government will lose Value Added Tax (VAT) and customs duties. Besides losing substantial amounts in VAT and customs duty, the govt would have to pay 9.0 per cent service charge. Plant owners have demanded import of oil on their own arguing that the BPC has been supplying sub-standard fuel to the power plants, which they said has caused mechanical problems to the plants
Private power plant owners are importing furnace oil at a higher price than international price. It is alleged that private importers of oil are transferring money abroad through over invoicing. This matter needs to be looked into. The importers may take the plea that they are importing superior quality furnace oil at a high price.
Despite the hike in retail level electricity tariff on an average by 6.9 per cent from March last, the subsidy to the power sector is set to increase by 16.66 per cent to Tk 70 billion in 2014/15. Industry insiders say that mounting dependency on high-cost oil-fired power plants is the cause of higher subsidy allocation in power sector even after a hike in electricity tariff. The fact remains that although we are paying more in terms of tariff, we are far from being relieved of load-shedding.
The writer is an economist
and a columnist.
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