The state-run Implementation, Monitoring and Evaluation Division (IMED) has blamed the capacity payment, indemnity law, IPP bill payment in USD, unplanned and inefficient power plants and corrupt procurement process for the ongoing crisis plaguing the country’s power sector.
IMED in a research report has said that the corrupt management having no technical knowledge and experience has made the country's power sector a rehabilitation centre for incompetent suppliers.
It has also strongly recommended cancelling these policies to protect the sector.
IMED has put forward the recommendations in the recently released report on the implementation progress of the power sector projects.
USD draining capacity charges
The IMED report cited the capacity charge as a model for looting, saying that in the last 14 years, around Tk 90,000 crore in US dollars was looted in the name of capacity charges. It has also urged private power plants to stop paying energy bills in US dollars.
The report said that BPDB has incurred a loss of Tk 1,05,419 crore in the last 12 years due to corruption, including unplanned projects, and overcapacity payments. On the contrary, BPDB's loss in the current and next fiscal years will be around Tk 113,532 crore.
In the next two years, the amount of losses will be higher than the total losses the government incurred in the last 12 years in the power sector, it said.
A clear plan is needed to get a subsidy for the power sector, the report said, adding that if there is no capacity charge, the investment will not come, this lie must be stopped.
Private power producers will be able to sell power at a markup of 25-50 per cent depending on location, with the government guaranteeing the uninterrupted purchase of at least one-fourth or half (MPP structure) of electricity for these two conditions are enough.
IMED suggested the introduction of the overhauling method instead of capacity charge when the power plant cannot be in production (maximum 20%), but being unable to produce month after month while charging capacity charges is a USD-draining malpractice.
It is unacceptable to pay locally-owned private power plants to pay foreign currency.
Indemnity Act increases losses
In 2010, the government made the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act. Although it has been made under special circumstances, the term has been repeatedly extended up to 2026.
Strongly criticising the decision, IMED said the model of the purchase price and cost per unit of the power sector is beyond accountability as per the indemnity act.
The annual cost per unit, including the capacity charge of the idle power plants, has also exceeded Tk 100. BPDB's losses cannot be stopped as payment is made in USD.
The IMED strongly recommended cancelling the indemnity law.
Inefficient power plant chokes
Dozens of power plants built with inferior equipment burn more fuel and produce less electricity. This increases the pressure on import-dependent energy supplies.
According to the report, these outdated and extremely energy-inefficient plants brought from abroad by falsely declaring the certificate of origin have become a burden for the power sector.
IMED says out of the 38 closed and 98 partially operational power plants that have good energy efficiency whether public or private, a plan is needed to keep them operational.
Preferment of plants with energy efficiency above 40 per cent and plant factor above 60 per cent will stop fuel wastage in power generation.
Incompatible captive generators must be closed
Due to high electricity prices in the industry and uncertainty over power supply, large to medium industries have set up captive generators, which IMED said, is unfair, involving gas theft and bribery.
The manufacturing cost of state-run industries is increasing due to high power prices and the private industry is producing less electricity by burning more fuel in low-efficient captive generators.
IMED has recommended a cost-effective and uninterrupted power supply to the industry by closing captive power plants.
Stopping system losses in electricity, gas and oil
IMED says in FY20, the electricity system loss was 8.73 per cent. Without transmission line system loss, others are unacceptable.
In a small country like Bangladesh, a maximum system loss of 3 per cent is acceptable. Any system loss higher than 3 per cent is power theft.
Thus, there is unreasonable system loss in the gas distribution and oil transportation sector as well. There should be a transparent plan to save energy by stopping theft and corruption of structural system losses.
Reforms procurement process
The report says that a group of corrupt management (ministry, secretariat, and central purchase committee) with no technical knowledge and experience has made Bangladesh's power sector a rehabilitation centre for incompetent suppliers.
In the name of awarding work to the lowest bidder in an open tender, substandard equipment, spare parts and unwarranted machines have entered the power sector.
Hundreds of billions of dollars are being spent on the balance of plant (BOP) sector in the name of spare parts and support systems, another major source of power budget wastage.
