$300m from reserve on the cards

The Bangladesh-China Power Company Ltd has sought $300 million in loans from the reserve to build a new transmission line stretching from Dhaka’s Aminbazar to Mongla, to facilitate electricity supply from the planned Payra Power plant.

This loan will have a two per cent interest rate, sources from the finance ministry and power, energy and mineral resources ministry told The Business Post.

Providing more details, Power Grid Company of Bangladesh’s Managing Director Golam Kibria said, “The existing two power lines of 400kv do not have enough capacity to fully handle the transmission of electricity from Payra to the national grid.

“So, the Bangladesh-China Power Company is planning to build two more power lines stretching from Aminbazar to Mongla from the country’s foreign reserve fund. Each transmission tower will have two transmission lines.”

As per the prime minister’s directive, the Bangladesh Bank can loan funds from the reserve after maintaining enough balance to cover imports for ten months. With the Bangladesh Infrastructure Development Fund’s (BIDF) recommendation, such loans are provided to the government’s infrastructure projects on a priority basis.

The interest rate is capped at 4 per cent for all loans in accordance with regulations.

Previously, the central bank gave the Payra port authority Tk 5,500 crore in loans from the reserve for the first time in the country’s history, while the Bangladesh-China Power Company Ltd is slated to get the second one.

Loan process underway

Sources from the finance ministry said they are preparing terms and conditions for the loan sought by Bangladesh-China Power Company Ltd, and a final decision will come after taking input from the Finance Division and central bank.

If approved, the Bangladesh Bank will transfer the fund to the Agrani Bank, and then this bank will disburse the loan to the power company. Moreover, 50 per cent of the interest will go to the Agrani Bank, and the remaining 50 per cent will go to the central bank.

What’s the progress of power hub?

Bangladesh has already completed two units of Payra Power Plant – the country’s largest coal-fired plant till date, and each unit is capable of generating 660MW of electricity. The first and second units began commercial production in May and December of 2020 respectively.

However, both of these units are not running at full capacity due to a shortage of transmission lines, said Kibria.

The Northwest Power Generation Company and China Machineries Company signed an agreement in 2014 to build the Payra Power Plant in Patuakhali, and jointly formed Bangladesh-China Power Company Ltd.

Aside from Payra, the Northwest Power Generation Company will build a 6,240MW plant, China Machineries Company 1,320MW plant, Germany’s Siemens AG LNG-based company 3,600MW plant, Rural Power Company Ltd 1,320MW plant, and Ashuganj Power Station Ltd 1,320MW plant.

Power Division sources said a small power station will also be built alongside the larger six. With these power plants, the government is planning to establish the largest power hub in Bangladesh with 16,240MW capacity in Payra.

The Payra port – built with a cost of around TK 21,000 crore – formally started operation on October 14, 2016.

The country currently has a total of 149 government and private power plants, and among them, 57 are state-owned, 91 privately owned, and one is jointly operated. Currently, Bangladesh can generate a maximum 13,792MW of electricity.

‘Why now at a time of crisis?’

Dr Zahid Hussain, former lead economist at the World Bank Dhaka Office, “Though the government says it has $45.26 billion in reserve, the actual figure is $7 billion lower.

“The government is calculating the total reserve amount while also including loans provided to the BIDF and Sri Lanka. The World Bank is not viewing this calculation positively, and requested that the $7 billion be excluded for the total reserve figure.”

He continued, “Commodity prices have gone up in the global market, and freight fares are high too. Oil prices are declining, but they are not stable. It will go up again after the Omicron threat has passed.

“Bangladesh has barely enough reserves to cover imports for another five to six months. In comparison, China is keeping import costs for 15 months, while India for 12 months. Under such circumstances, loaning funds from the reserve is not a good move.”

Hussain further said, “Development partners such as the World Bank, ADB and Jica are ready to provide loans for building these transmission lines. So why is the move being considered now, at a time of crisis?

“The country is currently suffering from a crisis of current balance, and this is why we should keep an adequate reserve in hand. Reserve can be used when needed, but we will not be able to get the loaned funds whenever we need.”

Adequate reserve is essential to keep the macro economy strong, otherwise we will not be able to take the impact, he added.