Should Bangladesh import power despite overcapacity?

The government is likely to spend around Tk 6,000 crore on importing electricity from India in the current fiscal year, forecasts Bangladesh Power Development Board (BPDB). Besides, 40 per cent of the country’s power generation capacity is sitting idle, with the government spending around Tk 10,000 crore per year in capacity charge.

At the same time, the country’s circular debt burden is increasing by leaps and bounds due to the construction of new power plants using foreign loans. Due to this increase, the government is hiking power and energy tariffs frequently, which is severely impacting public life.

Amid this, a new controversy over importing Adani Group’s electricity at high costs has arisen while the old question of whether Bangladesh needs to import electricity remains.

Experts have pointed out both the positive and negative sides of importing power. They say the ongoing 1,160MW electricity imports from India’s public and private sectors per day under four contracts are still affordable.

However, due to the energy price hikes and the devaluation of taka, the cost of imported electricity has gone up from Tk 6 per unit to more than Tk 8.56. BPDB’s company affairs department told The Business Post recently the figure may exceed Tk 10 by the end of this financial year.

Mohammad Tamim, a petroleum and mineral resources engineering professor at Bangladesh University of Engineering and Technology (BUET), supports power imports from India. But he said Bangladesh should first close the expensive oil- and liquefied natural gas (LNG)-fired power plants as these have become big burdens.

He also said the government should not pay more than the Payra and Rampal power plants’ benchmark price ($190-245 per tonne with 5,500 heating value) for Adani coal. As an alternative, he said BPDB itself should source coal for the Godda power plant.

Adani Group’s 1,600MW coal-fired power plant in Jharkhand’s Godda is scheduled to supply power from its first 800MW unit to Bangladesh from March 26. But there is a hitch as the company is demanding $400 for per tonne coal with 4,600 heating value, though the price is below $200 in the international market.

BPDB says if $400 is paid for per tonne coal, the cost of per unit electricity from the Godda plant will be more than Tk 25. It is not willing to buy electricity at this price. Now the government is discussing the matter with Adani Group.

Power Division Secretary Md Habibur Rahman declined to comment on the matter. Even BPDB officials did not want to talk about it as it is sensitive. However, the power secretary and two senior BPDB officials support the ongoing power imports from India’s public sector.

Ijaz Hossain, a former chemical engineering professor at BUET, said a balanced and rational use of imported electricity cannot be ensured if the existing expensive power plants are not closed first.

How expensive is imported power?

According to the 2016 power system master plan, the government plans to import 9,000MW electricity from neighbouring India, Nepal, and Bhutan by 2041.

As part of this, electricity imports from the Indian state of West Bengal started experimentally in 2013, with the amount being 170MW per day. At present, 1,160MW electricity is being imported from India – 250MW from the public sector and 910MW from the private one.

BPDB says per unit cost of electricity imported from India’s private power plants will exceed Tk 10 by the end of this fiscal year, which is now Tk 8.56. Before the recent dollar price hikes, Bangladesh had to spend Tk 6 on per unit electricity.

On the other hand, electricity purchased from India’s public power plants costs Tk 5.5 per unit. This will remain the same till 2023 as per an agreement signed in 2013.

In FY22, BPDB imported 7.7 billion kilowatt-hours of electricity from India at a cost of around Tk 4,700 crore, said its finance department.

Power Cell Director General Mohammad Hossain says Bangladesh had lower power generation capacity when it decided to import electricity.

“We also needed electricity by any means at the time, and we got it cheap. But the reality is that now fuel prices have gone up. How this fuel price hike will impact power prices is difficult to say at this moment,” he said.

“Fuel prices have to be adjusted. However, our imports from Adani Group are reasonable,” he added.

Bangladesh has to pay Adani Group over $1 billion per year, including high capacity payment, coal price, fuel system loss, and taxation, according to Adani Watch. Considering this amount, per unit electricity cost will stand at Tk 25, which will be the second-highest cost of power after that of the electricity generated from the country’s expensive diesel-fired plants.

Professor Ijaz said the decision to import Indian electricity was not made considering the crisis in Bangladesh.

It was a cross-border trade plan, he said.

“At the beginning, we said it was wrong to construct power plants. We also said our import policy was wrong. That is why the government could not use the full capacity of the plants while we are also bearing the burden of importing power,” he added.

SM Wazed Ali Sarder, a member (generation) of BPDB, said, “We cannot operate all power plants at their full capacity even if we want because we have fuel shortages. That is why importing electricity is safe.”

New LNG-based plants another danger?

According to BPDB, the total number of power plants in the country is 154. Another 33 plants with a capacity of 12,094MW are under construction, and seven of them are LNG-based with a combined capacity of 3,851MW. The seven include Indian Reliance Group’s Meghnaghat 718MW plant.

BPDB data shows the LNG-based plants will be ready for production between 2023 and 2024. But in addition to domestic gas shortages, the government is struggling to import LNG from the spot market.

Professor Ijaz said the new LNG-based plants are the new poison in the power sector. Pakistan’s power sector is in crisis, and he thinks Bangladesh is also at risk of facing that. He urged the authorities to adopt the “no electricity, no pay” policy.

Bangladesh’s power generation capacity is around 24,500MW. The maximum demand is 14,000MW (during summer), meaning 10,500MW remains unused.

However, the full generation capacity cannot be utilised due to transmission line limitations and fuel shortages, though the government is spending a lot of money in capacity charge.