Home ›› 28 Jun 2022 ›› Front
Independent power producers (IPP) import heavy fuel oil (furnace) used in their fuel oil-fired power plants resulting in an annual additional expenditure of Tk7, 200 crore of Bangladesh Power Development Board (BPDB) this year.
After 2020, production from expensive heavy fuel oil (HFO)-fired power plants has risen at an alarming rate and it is 24-25 times more than the neighboring countries.
According to BPDB, the cost of fuel oil for IPP has risen to Tk 16,036 crore as the import duty on HFO and price has doubled in the international market.
As a result, the debt of BPDB to IPP is increasing every day. Now the organization is unable to pay the bill due to financial crisis, an official told The Business Post.
Shamsul Alam, a professor of Daffodil International University, said power business is now the most lucrative one in Bangladesh.
Fuel oil is not brought through Bangladesh Petroleum Corporation (BPC) to give IPP plants owners a chance to make more profit. The government is providing an additional 9 per cent service charge to them.
In response to the query why fuel oil is being imported through IPP owners instead of BPC, MD Habibur Rahman, Secretary of the Power Division, told The Business Post: “I don’t know about it.”
It could be the decision of the government high-ups, he said. BPDB Chairman Mahbubur Rahman could not be reached for his comment after several attempts.
The BPDB data shows currently 67 fuel oil-fired power plants are operating in Bangladesh. Of them, 20 are state-run plants and 47 are private ones.
Their power generating capacity is 8,456 MW. BPC supplies fuel oil to the state-run power plants and pay the oil price at the government rate. At present BPC has fixed per liter diesel at Tk80 and furnace oil at Tk74.
Besides, the IPP plants are mainly run by HFO. The plants owners import energy under their own management. The government has to pay 9 percent service charge along with the price of the international market. This charge is called landing fuel cost.
BPDB IPP cell said, at present per liter HFO landing fuel cost is Tk 92. In a recent proposal to the Bangladesh Energy Regulatory Commission (BERC) to increase the bulk electricity price BPDB said 4,801 million liters HFO were required for power generation in 2021-22.
Of this, about 4,000 million liters will be imported by IPP. This year BPDB will have to pay an additional Tk7, 200 crore to pay Tk18 more per liter than the BPC price.
However, Global Petrol Price.com shows the HFO price was $1.46 per liter in the international market on June 15.
Adding a 9 percent service charge it will cost $1.59 per liter. This is Tk148 per liter in Bangladeshi currency. In other words, it will cost Tk 79 more per liter than the BPC price. With this the additional cost will be around Tk 30,000 crore.
Imran Karim, the President of Bangladesh Independent Power Producers Association (BIPPA) told The Business Post: “We have to spend a lot on oil imports, stocks and maintenance. Moreover, PDB does not pay our bills on time. That’s why our bank loan interest goes up. In the last 4-5 months, we owe at least Tk10, 000 crore to PDB, Imran Karim added.
Bangladesh has highest power generation from fuel oil in south Asia
In a recent proposal to increase the bulk electricity price, the BPDB said power generation from furnace and diesel had increased due to the gas shortage.
During this period, the cost of import duty on furnace oil has increased by 34 per cent and coal by 5 per cent VAT. Due to the unusual increase in the price of fuel oil and coal in global market, the electricity generation cost has increased to Tk5.17-Tk 9.19 per unit.
BPDB report shows the production cost of per unit electricity from gas-fired plants is Tk3.26, from coal Tk12.6, from furnace oil TK15.51, from diesel Tk 43.42, from hydro Tk2.8, from import 5.95 and renewable energy Tk12.64.
The report said the furnace oil consumption in IPP had increased by 144 percent since March 2020.
At the same time, the fuel oil price has risen by 366 percent. At present, diesel and furnace oil generate 26.49 percent of the total electricity. In the 2018-19 fiscal year it was 16 percent.
The Business Post has analyzed the scenario of electricity generation from fuel oil in several Asian countries.
It shows Bangladesh is the highest producers of electricity from fuel oil in South Asia. The neighboring India is only generating 0.1 per cent of the total electricity from fuel oil, Pakistan 12 per cent, China 2 per cent, Sri Lanka 5 per cent and Myanmar only 2 per cent.
A senior BERC official told The Business Post that the power generation from fuel oil is increasing at an alarming rate. This is only filling the pockets of IPP owners. BPDB said power purchase for the current year will be Tk84, 179 crore. A total of Tk43, 936 crore electricity will be sold. The deficit will be TK30, 251 crore. Therefore, the company has proposed to increase the price of wholesale electricity.
