A state agency has advised the government to quickly decide on rental power or dual-fuel power plants to save foreign currency, through an evaluation report.
The agency sent the report to the Ministry of Finance for consideration in the national budget for the fiscal year 2024-2025.
The report primarily suggests shutting down these rental or dual-fuel power plants and recommends reducing duty rates at the production or import stage to keep liquefied petroleum gas (LPG) prices at a reasonable level.
Rental power plants
According to the agency's assessment, privately owned rental and dual-fuel power plants have been operating at low production levels for a long time, and the Bangladesh government continues to pay capacity charges to these plants as per the contracts, resulting in substantial expenditure of foreign currency.
Sources from the Ministry of Finance and the Bangladesh Power Development Board (BPDB) revealed that in the revised budget for the current fiscal year 2023-24, a subsidy of Tk 39,406.79 crore has been allocated for the power sector.
On the other hand, the estimated expenditure for capacity charges (rental payments) for power plants is over Tk 32,000 crore.
Analysis shows that 81 per cent of the subsidy allocated for the power sector is being spent on capacity charges.
The approved budget for subsidies in the power sector for FY24 was Tk 50,235.27 crore. However, this amount has decreased due to the issuance of special bonds against the subsidy. So far, special bonds worth Tk 16,000 crore have been issued in the power sector.
State Minister for Power, Energy, and Mineral Resources Nasrul Hamid presented the costs of power plant rentals in the national parliament in September last year, saying that during the three terms of this government up to 30 June 2023, a total of Tk 1,05,000 crore has been paid as capacity charges to 73 independent power producers (IPPs) and 30 rental power plants.
Regardless of whether they are producing electricity, each state and private power plant receives capacity charges, as stipulated in their contracts.
Liquefied petroleum gas (LPG)
The agency believes that reducing the duty rate on LPG from the current 35 per cent at the production or import stage, as per the National Tariff Policy 2023, would make LPG prices more affordable for consumers.
They have also suggested considering partial duty exemptions or duty-free benefits for the import and local supply of raw materials, machinery, and equipment needed for the manufacturing of LPG cylinders.
However, the agency advises against the ambitious and nearly impractical plan of purchasing LNG from the spot market to meet the fuel or gas demands of local small traders, mills, and factories.
Instead, it recommends focusing on enhancing domestic fuel sources and building renewable energy capacities, which could save a significant amount of foreign currency spent on energy imports.
The agency notes that global supply chains for fuel and fertilisers are severely disrupted due to prolonged conflicts worldwide, including the Russia-Ukraine war. Russia, a major source of fossil fuels like oil, gas, and coal, has been facing international sanctions, causing disruptions in fuel supply channels globally. As a result, there has been a sharp rise in fuel prices worldwide.
There is a growing concern that the price of LNG in the international market might rise again due to high demand and limited supply in the coming summer.
Considering the situation, the agency has advised ensuring proper budget allocation for the necessary fuel imports to maintain an uninterrupted gas and power supply in the country.
Additionally, they urged a focus on clear action and investment plans for developing renewable energy sources as part of a long-term strategy, as the rise in fuel prices impacts all other sectors.
Oil and gas exploration
The evaluation report also says that there have been no exploration or extraction activities carried out in the oil and gas fields within Bangladesh's maritime boundaries in the past 10-15 years.
Geologists believe that the 23 offshore oil and gas blocks in the Bay of Bengal have significant reserves of oil and gas. Neighbouring countries India and Myanmar have conducted exploration in the Bay of Bengal, discovering and extracting substantial amounts of oil and gas. Given that these blocks are in the same territorial basin, there is considerable positive potential for Bangladesh as well.
The report recommends prioritising state-owned companies – Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) and Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) – for exploration and quarry development to prove their capability and efficiency.
It also suggests taking effective measures to develop a new Production Sharing Contract (PSC) policy, including joint ventures and extraction with multinational energy giants if necessary.
Coal
Considering the importance of coal-rich mines in Dinajpur and other northern regions of the country, the agency advises reducing coal imports from abroad.
Instead, the report says that there is an opportunity to save foreign currency in the energy sector by using domestically mined coal in thermal power plants.
The agency believes that local renewable energy sources such as biogas plants, wind turbines, and solar panels can be used to create small power grids to meet household and daily electricity and gas demands.
In this regard, a short, medium, and long-term strategic plan can be prepared and implemented as soon as possible to build the necessary energy capacity through public-private partnership (PPP) projects with the help of Infrastructure Development Company Limited (IDCOL) and other energy sector stakeholders, they added in the assessment report.
Hasan/Sharna
