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No single borrower exposure limit for coal-fired plants

Staff Correspondent
08 Nov 2022 19:21:42 | Update: 08 Nov 2022 19:47:10
No single borrower exposure limit for coal-fired plants
An areal view of 1,320MW thermal power plant at Payra in Patuakhali — Collected Photo

The government – in a bid to tackle the on-going electricity crisis – has halted the single borrower exposure limit for coal-fired power plants, as this particular energy source is more available compared to gas and fuel oils.

The single-borrower exposure limit will remain halted for the next five years to ensure better access to loans. The regulator’s Banking Regulations and Policy Department (BRPD) issued a circular in this regard on Tuesday.

At present, according to section 26 Kha (1) of the Bank Company Act, a single customer can borrow a maximum of 25 per cent of a bank’s total capital. This section of the law has been halted.

Coal-based power plant entrepreneurs can take loans beyond this limit for setting up, repairing plants or importing coal. However, the maximum limit will be decided by the central bank at a later time.

The circular stated that, in order to maintain an uninterrupted supply of money required for power generation, banks can provide loans exceeding the 25 per cent cap to single individuals or groups.

The loans can be used for land purchase, machinery imports, machinery installation expenses, repair, overhauling expenses, import and purchase coal and other raw materials for the establishment of coal-based power plants.

Vice President of Consumers Association of Bangladesh (CAB) and energy expert Shamsul Alam said, “This policy support came as part of the government’s policy to cut gas use and increase the use of coal as a cheap fuel for power generation.

“However, since the beginning, there was no transparency in lending to the power sector. It is alleged that entrepreneurs have laundered money by taking loans in a pouring manner. I am afraid that this may be the same case.”

He added that coal-based power plants require large investments, and the Bangladesh Bank should verify whether the banks have this investment capacity, or not.

At present, construction of three coal-fired power plants with a production capacity of 2,166 MW is underway by domestic private enterprises.

The government however had closed ten coal power projects last year over environmental issues.

Experts say that due to the on-going USD crisis, the government is once again leaning towards coal-based power plants to resolve the power crisis, but environmentalists have always been against this move.