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Bangladesh - Power & Energy - January 30, 2024

Worry about power supply in summer

Staff Correspondent: The power and energy sector of the country is in trouble with a huge amount of debt. On the one hand, due to lack of money, they are not able to pay the price of electricity to the private centers on time; On the other hand, due to the lack of US dollars, the debts of foreign companies in the power and energy sector have to be kept in arrears.
As per the latest from the concerned agencies, the private power plants generating in the country owe about Tk 25 thousand crore to the Power Development Board (PDB). PDB owes gas bill to Bangladesh Oil, Gas, Mineral Resources Corporation (Petrobangla) to the tune of around Tk 8,000 crore.
India’s Adani owes about $500 million (about Tk 5,500 crore) in electricity bills. Foreign suppliers will get about $270 million (about Tk 3,000 crore) from Bangladesh Petroleum Corporation (BPC), a government-owned oil importer. And Chevron, the US company that extracts gas in Bangladesh, will get $200 million (about Tk 2,200 crore) for the gas price. Apart from this, some other sectors are due in electricity and energy sector.
Experts say that as arrears increase, the confidence of energy suppliers tends to decrease. They are not interested in long term supply contracts. They also neglect to provide fuel. In case of delay in payment of dues, penalty is also payable as per the agreement. Banks increase the fee for opening new import credit cards.
Meanwhile, the summer season is starting next March. Then additional fuel will be needed to run the power plant, gas, coal and fuel oil imports will have to increase. The lack of money and the dollar crisis have raised doubts about whether enough fuel can be imported for power plants. Due to lack of fuel, it was not possible to run the power plant as per requirement in summer last year. It required 2 to 3 hours of load shedding in Dhaka and 8 to 10 hours in villages.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid said that there are some problems and efforts are being made to solve them. Some dollars are being made available, with which the arrears are being repaid. The rest will be resolved by discussion with the Finance Department. He said that the government has arranged to pay some of the dues of private power plants through bonds. Dollars will be needed to pay foreign debts.
The government sells electricity at a price lower than the cost of production. The remaining amount is subsidized by the Finance Department of the Ministry of Finance. However, the finance department is not able to pay the subsidy money to the power sector on time due to insufficient revenue collection.
According to experts, the amount of subsidy has gone up a lot because the power plant has to be installed and the central rent (capacity charge) has to be paid, which the finance department is unhappy about. In the fiscal year 2022-23, the amount of central rent in the public and private sectors has stood at more than Tk 26 thousand crore.
On the other hand, banks are not able to provide US dollars as required to pay the debts of foreign companies in the power and energy sector. Bangladesh Bank had more than $48 billion in foreign exchange reserves in 2021, which has now come down to $25 billion. According to International Monetary Fund (IMF) sources, reserves stand at $20 billion.
Experts blame the crisis on import dependence in the power and energy sector. They think that the government has chosen the path of import rather than insisting on extraction of gas in the country. It is having a negative impact now.
There are power plants in the public and private sectors in the country. Electricity is also imported from India. PDB buys all electricity. As of the agency’s latest last month of December, private power plants will get about Tk 25,000 crore. This arrear has accumulated because the finance department has not paid enough money for subsidies for a long time.
Unable to pay the subsidy, the finance department is now issuing bonds (financial products like savings bonds), which will be used to pay off debts in the power and fertilizer sectors. Bonds worth Tk 2000 crores have already been released to pay off the debt of the power plant.
Imran Karim, former president of Bangladesh Independent Power Producers Association, an association of private power plant owners, said that the bond work is slow. Out of Tk 12,000 crores, Tk 2,000 crore bonds have been given. The rest needs to be done quickly. Half of the dues will still be due. He said, this summer season may be long. If the dues are not paid, it will be difficult to run the power plant.
PDB had informed before the beginning of the year that the amount of dollars needed for the power plant including fuel oil, coal import and other needs. In the current fiscal year (2023-24), their demand was $3.73 billion in the first six months till last December. Officials project that demand will be even higher in the next six months. But PDB is not getting regular dollars. The company is not able to pay the price of imported electricity regularly.
An average of 25 percent of power generation capacity had to be shut down due to lack of fuel last summer season. 1,160 MW electricity is being imported from India for several years. Adani’s power plant built at Godda in Jharkhand has been connected with this since March last year. Sources in the power department said that as of last December, Adani’s power plant bill was about $500 million in arrears and rising. However, Adani continues to supply electricity as per demand.
However, due to inability to import coal, Rampal and Payra power plants (one unit) were shut down for some time last year.
Wrong policy is being taken
The country now has a power generation capacity of more than 26,000 megawatts per day. But due to lack of fuel at the time of need, electricity cannot be produced as per demand. The highest electricity generation in a day was on April 19 last year, 15,648 MW. After that, the maximum production per day has been 14,500 megawatts. An average of 25 percent of power generation capacity had to be shut down due to lack of fuel last summer season.
Meanwhile, BPC has been making profit for one and a half years by selling fuel oil. However, the corporation has not been getting regular dollars to pay the bill of imported fuel oil for almost two years. Foreign companies supplying fuel are under increasing pressure to pay outstanding bills. As an alternative, BPC had proposed to the energy department in May last year to trade in yuan with China and rupee with India. It is not finalized yet.
According to BPC sources, they need to open 17 to 18 letters of credit to import 5 lakh tonnes of refined fuel oil and 1 lakh tonnes of crude oil every month. But for lack of dollars, banks regularly default. A loan takes 25 to 30 days to repay.
The country now has a power generation capacity of more than 26,000 megawatts per day. But due to lack of fuel at the time of need, electricity cannot be produced as per demand. The highest electricity generation in a day was on April 19 last year, 15,648 MW. After that, the maximum production per day has been 14,500 megawatts.
According to BPC, as of last Thursday, outstanding bills of foreign companies had accumulated to $270 million. Officials say that sometimes $2 million are discounted from Bangladesh Bank. However, it is not possible to pay the full amount. Foreign companies are warning not to supply fuel unless dues are received.
Chevron sells its share of gas produced domestically to the government. The government pays them in dollars. Chevron supplies 55 percent of the country’s gas production. They have to pay an average of $5 million in bills every month.
Energy Department sources said Chevron has been billed for months. However, previous dues are accumulated. The amount is more than $20 million. According to Petrobangla sources, they will get more than Tk 8000 crore in gas bill from PDB, as well as more than Tk 2000 crore owed to government fertilizer factory. Despite repeated requests, the money is not available.
In July 2022, due to the dollar crisis, the government stopped importing liquefied petroleum gas (LNG) from the open market. Then when the gas crisis starts, traders agree to pay higher prices, but want uninterrupted gas. The government raises prices by an average of 80 percent. But the gas crisis remains.
According to Petrobangla sources, they will get more than Tk 8000 crore in gas bill from PDB, as well as more than Tk 2000 crore owed to government fertilizer factory. Despite repeated requests, the money is not available.
Raising price will not solve problem
Experts believe that import dependence in the power and energy sector and excess capacity and huge central rent in the power sector have put pressure on the country’s economy. They say that the energy sector needs foreign exchange equivalent to $12 billion a year. It is difficult to provide so many dollars.
Khandkar Golam Moazzem, the senior research director of the private research institute Center for Policy Dialogue (CPD), said that the financial situation of the electricity and fuel sector is in dire straits. PDB is now going to be the white elephant to pay the rent of the power plant by increasing the capacity. He said, the government may be able to save money by increasing the price of electricity and fuel, but the problem will not be solved.

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