Sep 14, 2024
| Shahnaj Begum | The Daily Observer
The Power, Energy and Mineral Resources Division is now struggling to make payments to Independent Power Producers, power exporters, LNG suppliers - both long-term and spot sellers - against purchases due to a brewing currency crisis that poses a risk of halting supplies, said sources
The interim government has sought an additional $6 billion to manage the situation, sources in Energy and Finance division has said.
As of august, the government owed approximately $2.4 billion to private independent power producers, $475 million for electricity imports from India, India's Adani Group, with six months of power bill around $800 million in arrears, $630 million in outstanding and current interests on a loan for the Rooppur Nuclear Power Plant, $350 million to gas companies and $320 million to LNG suppliers.Â
"We are in deep crisis as far as finance is concerned, our first priority should be to ensure the power and energy supply in the country…there is no way, we have to keep continuing the payments to manage the sector," energy expert and former caretaker adviser Dr M Tamim told the Daily Observer on Saturday.
In line with that plan, on Thursday, the finance ministry sent a letter to the ADB seeking $1 billion in budgetary support for the energy and power sector.Â
It has been said that Bangladesh could get $3 billion in budgetary support under an Asian Development Bank (ADB) and World Bank (WB) arrangement for energy and power sector reforms.
However, the ADB will provide $400 million, the remaining $600 million is expected to come from the Asian Infrastructure Investment Bank (AIIB) and Japan International Cooperation Agency (JICA) under an ADB arrangement.
In line with its bid to get budgetary support, the finance ministry also sought another $1 billion from the WB to bring about reforms in the energy and power sector.
Although, in the budget for this fiscal year, Tk 35,000 crore has been allocated for power sector subsidies. However, Tk 30,000 crore will have to be spent to settle the subsidy arrears from the last financial year. Consequently, only Tk 5,000 crore will be available for the Finance Division to allocate for subsidy payments in FY2023-24.
Independent Power Producers (IPPs) in Bangladesh and Indian exporters are urging the government to settle outstanding power bills. In response, the government has partially cleared some outstanding subsidies by issuing bonds.Â
India's Adani Group, with six months of power bill worth around $800 million in arrear, wrote to the interim government Chief Adviser Dr Muhammad Yunus to settle down the arrears.
Not only Adani, Russia has asked Bangladesh to pay $630 million in outstanding and current interests on a loan for the Rooppur Nuclear Power Plant by September 15.
Additionally, the Tripura government has reportedly decreased power supply to Bangladesh due to outstanding bills of around Rs 150 crore, providing only 90-100 MW of electricity out of the contracted 160 MW.
Officials noted an increase in LNG import subsidies for the next fiscal, with a Tk 7,000 crore allocation compared to Tk 6,570 crore in this fiscal due to the strong dollar and plans for heightened gas imports, despite stable international gas prices.
"Payment has to be made in the US dollar within 15 days of submitting import invoice. If there is a delay of seven days, the rate of interest would be LIBOR plus 4 percent. For further delays it would be LIBOR plus 5 percent. This law is applicable to all contracts with the foreign companies," a senior official of the Energy Division has said.
He said government is now struggling to make payments to global LNG suppliers - both long-term and spot sellers - against purchases due to a brewing currency crisis that poses a risk of halting supplies.
"Bangladesh is set to clear its outstanding payments to LNG suppliers, international oil companies (IOCs), and power plant owners by paying approximately $960 million per month starting from July," a senior official of the Energy Division has said.
It has also defaulted on paying import bills to spot LNG suppliers, namely Vitol Asia Pte Ltd and TotalEnergies, they added.
Petrobangla has also been defaulting on payments to floating LNG terminal owners for their LNG re-gasification services, they alleged.
Market insiders said Petrobangla owes around US$ 100 million to LNG suppliers Qatargas, US$ 45 million to OQ, US$ 40 million to Vitol Asia and US$ 20 million to TotalEnergies, which are already overdue.
They added that Petrobangla also failed to pay at least one invoice on schedule to Summit Group's floating storage and regasification unit (FSRU).
Chevron urged Petrobangla in a letter to clear all its dues, amounting to around US$280.72 million, by August 31, 2023.
The interim government plans to pay all bills gradually, Energy and Power sector adviser Dr Fawzul Kabir Khan told the energy reporters in a recent briefing. News Link: Power, Energy Division struggling to pay arrears