Home Power & Energy PDB’s power purchase cost to be Tk 1 lakh cr
Power & Energy - Uncategorized - July 18, 2023

PDB’s power purchase cost to be Tk 1 lakh cr

Mahfuja Mukul: Bangladesh Power Development Board (BPDB) has to buy almost half of the electricity from Independent Power Producers (IPPs) and rent-based centers to meet the country’s demand. In the financial year 2021-22, a total of 85,607 million kilowatt hours of electricity was produced. Out of this, 40,174 million kilowatt hours are taken from the private sector. BPDB has to account for about 70 percent of the total cost in this sector while taking this high-cost electricity. Where five-six years ago this cost was half of the total cost.
BPDB’s debt is increasing every year as it buys power from IPP at a high price and sells it at a low price. According to a reliable source of the organization, the potential power generation in the financial year 2022-23 was estimated at 8,995 crore kilowatt hours (including imports). The potential cost of BPDB to get this amount of electricity is Tk 94,265.50 crore.
In this case, taking into account the 70 percent expenditure of the previous fiscal year (2021-22), the amount of expenditure for the purchase of electricity for IPP and rent-based centers stands at least at 65,986 crores. However, this cost estimate was for the beginning of the just ended financial year. And according to the trend of the last few years, the share of IPP and rental power plants in the total electricity purchase of BPDB is gradually increasing.
BPDB officials believe that if we calculate the increase in demand for electricity, devaluation of taka against the dollar and increase in energy import cost compared to the beginning of the last financial year, the total cost will exceed Tk 1 lakh crore.
Experts in the power and energy sector say that even though the capacity of BPDB’s own and joint power plants is sufficient, more power is being taken from private and rental-based plants. On the one hand, the cost of production has increased, on the other hand, government power plants have been installed. Basically, they claim that BPDB has given enough opportunities to private sector entrepreneurs to make financial profit.
An analysis of BPDB’s last five financial years showed that in the financial year 2021-22, the organization had to spend 70 percent of the total cost including electricity purchase while buying electricity from IPP and rent-based centers.
But against the demand BPDB and jointly owned power plants have sufficient capacity. As a result, the financial liabilities of BPDB have increased in the last few financial years, as well as the amount of subsidy.
Analyzing the financial report of the organization, it was found that the total expenditure of BPDB including purchase of electricity in the financial year 2021-22 was Tk 74,223.25 crore. Out of this, Tk 52,003 crore are spent on buying power from IPP and rental power plants, which is 70 percent of the total cost. Out of this, 49 thousand 213 crores from IPP and Tk 2,789.43 crores spent on purchase of electricity from rental.
It is not the case that BPDB’s expenditure and IPP’s financial expenditure has increased in the financial year 2021-22, but it has increased at a proportional rate for the last five financial years. The total expenditure of BPDB in the financial year 2020-21 was Tk 51,879 crore.
Out of this, the cost of electricity purchase from IPP and rental is Tk 27,737 crore and Tk 3,328 crore respectively, which is about 60 percent of the total cost. In the previous financial year, the total expenditure of the organization in this sector was Tk 41,199 crores. Out of this, the expenditure on IPP sector was Tk 17,518 crore and the cost of rental power plant was Tk 3,216 crore.
In the financial year 2018-19, the total expenditure was Tk 41,245 crore, while the expenditure of IPP was Tk 15,748 crore and the cost of rental power plant was Tk 50,013 crore. BPDB had to spend a total of Tk 29,742 crore in the financial year 2017-18 for purchasing electricity.
Out of this, expenditure on IPP was Tk 10,411 crores and Tk 6,282 crores was spent on purchase of electricity from rental.
Analyzing the accounts of these five fiscal years, it can be seen that the purchase of electricity from rental-based centers has gradually decreased, but has increased from IPP. BPDB has also had to spend a huge amount of money on capacity charges in the last five financial years due to purchasing electricity less than the capacity of IPP and rent-based centers. This charge is basically the capacity cost of a power plant.
The charge is determined on the condition that 80 percent of the center is utilised. But in the last five fiscal years, power plants have utilized half or less of their capacity. On the contrary BPDB has to pay capacity charges for unused capacity. In the last five financial years, the cost of purchasing power behind IPP and rental power plants was Tk 141,256 crores. Out of this, Tk 52,872 crores have been spent only on capacity charges.
Energy expert Professor Dr. Shamsul Alam said, “The power sector will be dependent on the private sector, this is normal according to the policy of this sector. Import dependence will increase now. The government is reckless in implementing its policies. It is not for them to see whether the power sector will be imported and commercialized, whether public interest will be protected. If there were any regulatory measures in this sector, then the price of electricity would not have increased. The cost of BPDB would not have increased.
Private sector entrepreneurs say that the IPPs in the power sector have been cooperating in power supply for years. Basically, in plant factor, they have taken electricity from BPDB’s centers where power purchase is easy and cost is low. In addition, many gas-based power plants have a long-standing energy crisis.
Therefore, BPDB has taken power supply from oil-based power plants. Electricity generation cost with local gas is low. On the contrary, oil-based power plants cost more power generation. As a result, it is normal that the cost will be higher according to the calculation.
In this regard, Faisal Karim Khan, president of Bangladesh Independent Power Producers Association (BIPPA), an organization of private power sector entrepreneurs, said, “BIPPA is trying to supply electricity according to the demand of BPDB. It has been done so far. However, this is becoming difficult now due to rising arrears of private power plants to BPDB and high value of dollar to commercial banks.

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