Thursday, December 8, 2011

Power Import Uncertain

India remains lukewarm to Bangladesh's request to lower its high tariff.


 Importing 250 megawatts of power from India from late next year remains uncertain as Delhi is not responding to Dhaka's request for the lowest possible power tariff.

India is offering a power tariff of Tk 6-8 per kilowatt hour or a unit, while Bangladesh is seeking a price less than Tk 5.25 per unit. This price includes power tariff, transmission and other costs, said a well-placed Power Development Board (PDB) source.

Delhi's proposed tariff is equivalent to power cost sought by heavy fuel oil-based rental power plants, making it unattractive for Dhaka. 

Besides, the Indian offer also depends on the vetting of the West Bengal government. The recent non-cooperation of the West Bengal government over the Teesta water sharing treaty has made people doubtful about a cheaper offer.

Indian National Thermal Power Company (NTPC) and Bangladesh's PDB were supposed to sign a power purchase agreement (PPA) in March this year. Till date it has not been signed due to difference of opinions over tariff and other issues.

As the two countries have not signed the PPA, the Asian Development Bank (ADB) has put on hold the disbursement of its approved loan.

But Bangladesh has meanwhile signed deals worth $142 million with two foreign power companies to set up a power grid and a power conversion station at Bheramara. A large segment of this money will be given by the ADB that signed a $ 100 million loan deal with the government last year. 

As the ADB suspended loan disbursement, the Power Grid Company Bangladesh (PGCB) had from its own fund made 20 percent advance payment to the two companies-- Cobra SA and Siemens Germany-- to initiate the project.

Explaining the power tariff issue, a top PDB official said as per the understanding between the two governments, Delhi would provide Dhaka the cheapest possible power. India's power tariff is higher than that of Bangladesh in general.

Power tariff in India is different at different power plants. Some are cheap and some are costly for all clients, except the central government which gets the lowest tariff. 

To give Dhaka an extra benefit, Delhi had agreed to supply power under the central government's quota. But even that rate can vary from power stations to power stations. India has already offered tariff from some West Bengal power plants, while Bangladesh said there are some plants that sell power at still lower rate. 

“But it is not just about getting power at low rate. We have a long term vision of interconnectivity with our neighbours. This kind of cooperation would ensure a regional energy security in the long term,” said a high official.

“Unfortunately, it seems India does not share the same vision. They are more keen to ensure their business interest first. This is why the signing of the PPA remains uncertain,” he added.

The official pointed out that Bangladesh was ready to sign the deal any day if India offered an acceptable tariff.

Project background

The move to import power from India was initiated in January 2010 when the two countries signed a memorandum of understanding. To import power, a 125 km transmission line has to be constructed between Behrampur in India and Bheramara in Bangladesh. Of this, 40 km would be within Bangladesh. 

The transmission systems of India and Bangladesh, which are based on 400 kV alternate current (AC) and 230 kV AC respectively, are proposed to be synchronised by installing a back-to-back high voltage direct current (HVDC) link. The line will have an initial transfer capacity of 500 MW, which will later be raised to 1,000 MW.

Early last year, the PGCB invited a tender for installing a 30 km, 400 kV line for Ishurdi-Khulna double-circuit (D/C) transmission line at Bheramara. It floated another tender to install a 500 MW back-to-back HVDC system at Bheramara .

In July last year, the PDB signed a 35-year power transmission agreement with Power Grid Company of India Limited (PGCIL) to import 250 MW of electricity. Under the agreement, the power and transmission tariff the PDB will pay to its Indian counterpart will be on a monthly basis, and it will be determined by India's Central Electricity Regulatory Commission (CERC).

In October last year, Bangladesh government and the ADB signed the $100 million loan deal for interconnection.

In February this year, the PGCB awarded a $ 14.5 m contract to Spanish company Cobra SA for constructing the Bangladesh segment of the line. The deal requires Cobra to complete the double-circuit overhead line by 2012. And in April this year, Siemens Germany was awarded a $128 million contract to set up the converter station at Bheramara that will convert 400 kV high voltage power from India to 230 kV voltage for feeding into Bangladesh's existing grid. Siemens is required to complete the contract within two years.