Finance ministry wants to ensure transparency

The government has issued special treasury bonds worth Tk 6,565 crore to state-owned and private banks for payment of power sector dues. The finance ministry now wants to ensure transparency and accountability of such bonds.

In this regard, a letter has recently been issued from the Finance Division's Treasury and Debt Management Department to the Power Division. This information came from sources in the Power Division and a letter obtained by The Business Post.

The government started issuing special bonds to settle dues accumulated in banks from the Private Power Producers (IPPs) and fertiliser importers.

This letter read that the government is facilitating the payment of outstanding bank liabilities of private power generation companies as part of the power subsidy.

For this reason, special treasury bonds worth Tk 6,565 crore have been issued in favour of 24 banks from the Treasury and Credit Management Wind of the Finance Division.

Power Division officials say the banks will get an interest against these bonds, and maintain their cash reserve ratio (CSR) and statutory liquidity ratio (SLR) with the Bangladesh Bank through these bonds.

At the end of tenure, the government will take back these bonds after paying principal with interest.

The government usually issues 20-year tenure bonds. But the tenure of this special bond will be different in favour of each bank. This tenure can range from 8 years to 10 years, insiders say.

From June 2023, the Ministry of Finance will be issuing bonds in phases to 40 banks to pay off the total liabilities of Tk 25,500 crore. Ministry officials say the interest rate of these bonds has been set at 7.7 per cent, which is almost equal to the repo rate set by the Bangladesh Bank.

In FY23, the total subsidy in the power sector stood at Tk 42, 893 crore. After increasing the price of electricity several times last year, the amount of subsidy has decreased.

In 2022, the power sector needed more than Tk 4,000 crore per month as subsidy, now it has come down to around Tk 3,000 crore. Finance department officials said the government has paid the electricity subsidy dues till October last year.

The Bangladesh Independent Power Producers Association (BIPPA), an organisation of private power plant owners, has informed that the private companies are receiving 25 per cent – 30 per cent of the monthly bill from the Bangladesh Power Development Board (BPDP).

Until June last year, the amount of outstanding subsidy in the fertiliser and power sector was around Tk 42,000 crore. Out of this, Tk 15,000 crore was in dues for power companies, and Tk 10,500 crore for fertiliser importers in forty banks.