Sep 27, 2024
| FHM Humayan Kabir | The Financial Express
Month-on-month capacity- charge payments to a bunch of privileged private electricity producers during the deposed Sheikh Hasina administration had been swelling beyond the capacity of the exchequer, insiders said on Friday.
The Sheikh Hasina government purchased power from the costly private-sector stations and rental plants by keeping the public-sector stations allegedly idle, they said.
In December 2023, the government liabilities on account of capacity charge to the IPPs or independent power producers and rental power plants were recorded at Tk 25.17 billion which picked up by 84.62 per cent to Tk 46.47 billion in June last.
According to the Ministry of Finance (MoF), the liabilities to the IPPs and rental power stations during six months from July to December this calendar year 2024 had ballooned compared to the previous six months.
The government liabilities to these power plants ballooned to Tk 34.05 billion in January 2024, while the outstanding was recorded at Tk 31.41 billion in February, Tk 31.96 billion in March, Tk 35.65 billion in April, Tk 39.78 billion in May and Tk 46.47 billion in June last, MoF officials said.
"We have inadequate funds as well as foreign- exchange reserves for paying the liabilities to the private-sector power producers. We are gradually paying the outstanding bills every month. We hope we will be able to clear all the charges within next few years," says one MoF official.
When asked, Power Division and Bangladesh Power Development Board (BPDB) officials told the FE that they were working to find out the ways of phasing out the existing rental and private- sector power plants for cutting its (govt's) liabilities in the future days.
"The power purchase agreements and other deals with the private electricity producers are being reviewed seriously. Besides, the government will find out those power plants which got some extra privileges over the years from the last ousted government," says a senior BPDB official.
"After the review, we will not renew agreements with the costly electricity producers and some deals might also be scrapped if we find any fraudulent practices," he adds, requesting anonymity.
In many cases, the government had kept some public- sector power plants, producing electricity at cheap rate, idle. Instead, it had got supply from the costly private-sector ones. It has boosted the liabilities (capacity charges) month-on-month, a senior Power Division official said.
Meanwhile, the government in June this calendar year paid Tk 38.24 billion against the outstanding capacity charge for the month of July 2023 and in July-August period handed over Tk 34.30 billion for the outstanding of August 2023, MoF data showed.
The government issued bonds and paid cash to the IPPs and rental power plants for purchasing the electricity, they added.
Meanwhile, Bangladesh government's liabilities to the private power producers increased enormously to a total of Tk 360.74 billion till June last as the capacity charge has ballooned, MoF officials said.
The huge capacity charge for the payment to IPPs and rental plant owners has become a big burden for the Bangladesh government amid the struggling foreign-exchange reserves and rising external debt burdens.
The banks are unable to provide dollars to pay dues of the foreign companies in the power and energy sector. Bangladesh had a reserve of over US$48.0 billion two years back, which depleted to $20 billion in recent days.
Economists suggested interim government to scrap the deals or revise the power-purchase agreement immediately amid the present economic crisis in the country.
According to the MoF data, the total amount of capacity charge to be paid by the government to the IPPs had stood at Tk 409.37 billion till June this year 2024.
The total capacity charge stood at Tk 409.37 billion for purchasing power from the IPPs between the month of July 2023 and June 2024, MoF officials said.
Meanwhile, the government allocated Tk 400 billion as power subsidy in the current FY2025 national budget, one-third of the total subsidies in the budget. Most of the allocation will be spent on paying the capacity charges.
The last Sheikh Hasina government allowed many private-sector power producers to set up electricity-generation plants here in Bangladesh most of which are costly in terms of electricity price, resulting in a rise in liabilities of the government.
Usually the Bangladesh Power Development Board (BPDB) sells electricity to the consumers at lower rate than the rate it purchases from the IPPs.
Meanwhile, the government paid a total of Tk 280 billion as the capacity charge in FY 2023 to the power producers.
Statistics compiled by BPDB, finance ministry and a private think-tanks show that the government paid Tk 783.70 billion in capacity charges between FY 2019 and FY 2023.
The Sheikh Hasina administration in its three terms paid a total of Tk 1.05 trillion to 82 independent power producers (IPPs) and 32 rental power plants in capacity charge or rental payments, the then State Minister for Power, Energy and Mineral Resources, Nasrul Hamid, said in September 2023.
The amount was paid in the 15 years since 2009, when the Awami League government came to power.
The big gap between electricity- production costs and consumer prices has compelled the government to allocate substantial subsidies in recent budgets.
The government needs to pay the capacity charges to the IPPs and rental power plants, including Bangladesh-China Power Company Plant (Payra power plant, Meghnaghat 450MW Power Ltd, 210MW Rural Power Co Ltd, 335MW Summit-Meghnaghat Power Ltd and 414MW Sembcorp NWPC Ltd, 145MW Aggreko International Projects.
Research Director at the Centre for Policy Dialogue (CPD) Dr KG Moazzem told the FE that the government should revise or even scrap the power-purchase agreement with the IPPs and rental power plants immediately.
Since Bngladesh's economy is passing a rough weather, the government can even apply the "Force majeure clause" of the agreements for revising or scrapping some agreements, he added.
News Link: Hefty capacity charge paid to rentals keeping govt plants idle