Power sector incurring over Tk 10,000 cr loss

Mostly for 58 pvt plants annually

Mahfuja Mukul: Collusion with private power plant owners to buy power at high prices has cost the state about US$1 billion a year. The annual loss in Bangladeshi currency is about Tk 10,000 crore.
Bangladesh Power Development Board (BPDB) purchased power from some power plants at a 25 percent higher price despite having almost the same type of power plants, a study says.
Analyzing the price of electricity purchased from 58 private power plants during 2004 and 2017, the research says that due to non-contracting of competitive contracts with some private power plants, huge cost has increased in the power sector.
The research report was presented at the Bangladesh Institute of Development Research (BIDS) recently. The research was done by Mushtaq Hossain Khan, Chief Executive Officer of Anti-Corruption Evidence Research Partnership Consortium.
The study shows how the electricity prices at the consumer level are increasing due to politically motivated businessmen.
Mushtaq Hossain Khan said, it makes a huge difference in terms of cost. Which is about $1 billion a year.
According to the study, BPDB provides electricity at relatively low cost to keep it accessible to the people. And losses are covered by public money subsidy. According to the research report, the cost of electricity increased by 15 percent due to only leasing of government land as a subsidy to private power plants. This is calculated by taking into account the issue of lease in the economic modelling.
In addition, corruption in the power sector has been facilitated through political collusion. For example, electricity has been purchased from expensive plants while installing low-cost power plants. But it was supposed to be the other way around.
Even though expensive power plants are supposed to supply electricity during peak hours, electricity is still purchased from them when the demand for electricity is lowest (base load). These power plants get gas earlier than others. It happens in collusion between the two parties.
According to the study, according to the government’s agreement with the expensive rental power plants, they have to pay 60 percent of the production capacity as capacity charge, even if they are not ordered to produce electricity.
Due to the benefit of capacity charge, their profit is more if they do not generate electricity.
Mushtaq said the only solution is to ensure open competition without considering political connections.
He said that a favorable environment should be created for investors who do not have political identity. It can reduce costs up to 26 percent at the production stage.
The study also found that electricity costs could be reduced by up to 36 percent if development partners such as the World Bank and Asian Development Bank were helped and changes in land leases were made.
Now let’s know about its side effects. According to sources, the amount of credit to the public and private sectors from foreign sources is increasing. Current total foreign debtof Bangladesh is$95 billion. At the end of December of 2022, the amount of this foreign loan exceeded $100 billion. The amount of this loan in Bangladeshi currency stands at more than Tk 9 lakh crore, which is about 21 percent of the country’s total GDP.
73 percent of this huge loan is from the government. The remaining 27 percent of the loan was taken by the private sector of the country.
According to the data of Bangladesh Bank, at the end of Marchlast year, the amount of loans taken by the government from foreign sources was $68 billion. Of this, about $57 billion was directly borrowed by the government. All these loans are long term. The remaining $11.5 billion have been borrowed by various government institutions. At the end of December 2022, the amount of loans taken by the private sector from foreign sources stood at $25 billion.
In just five and a half years, the country’s debt from foreign sources has more than doubled. Experts fear that this jump in foreign debt in a short period of time may become a cause of danger in the future. They say that there is a severe crisis of dollars in the country at the moment. This crisis will deepen in the future. In this situation, the government as well as the private sector must be under pressure to repay the foreign debt.
Experts believe that the mega projects of the power and energy sector have played the biggest role in increasing the debt burden. They believe that these import-dependent energy-based projects are putting pressure on the power department and the government’s coffers and are also playing a major role in increasing indebtedness.