Friday, April 6, 2012

Is there an end to endless power outages?

Ailing and limping, the country’s power sector is in the doldrums. On Wednesday last a Bengali daily from Dhaka front-paged, “Power crisis is terrifying”. Indeed, power outages have become widespread amid fear of further woes by erratic electricity supply, while it is affecting the lives of the dwellers with about six to seven hours of outages in a day. Load-shedding in the summer may be worse than that of the previous year.
The country’s overall electricity generation is now hovering around 4,500 MW, but during the summer the demand will be around 7,000 MW. The BPDB is learnt to have proposed a load management proposal to the energy ministry from one hour to four hours a day during the summer to cope with the electricity supply shortage.
Headlined “Tk 20,000cr fuel subsidy this year”, a news report detailed the subsidy issue towards the end of last year. Although Bangladesh has revised retail fuel prices and power tariff frequently this fiscal year, the government would have to pay up more than Tk. 20,000 crore, which is highest so far, as fuel subsidy, as reported in an English daily on 15 October 2011. The Bangladesh Power Development Board (BPDB) opined that fuel consumption is expected to cross seven million tonnes, up from an average three million tonnes in the previous decade. In 2010, the country imported 4.8 million tonnes at a cost of Tk. 29,000 crore, which is expected to cross Tk. 49,000 crore. According to the central bank’s letter of credit (LC) settlement statistics, import of petroleum surged 135 per cent in the July-September quarter, this fiscal year, compared with the same period last year.
The country’s demand for power used to be met by gas extracted from local fields. But gas supply has failed to meet the rising demand for electricity, leading to chronic power shortages. According to the Bangladesh Petroleum Corporation (BPC) the main reason for soaring oil consumption was the introduction of privately held fuel-based quick-rental power plants, as well as a rise in captive power plants at factories. The oil subsidy bill in the 2011-12 financial year will rise to more than Tk. 20,000 crore. 
Power generation by such plants started last year. Before that, Bangladesh used to import 32-35 lakh tons of fuel every year.
The government permitted private companies to install 24 power plants with a total generation capacity of 2,770 megawatts. Afterwards, the government permitted some more privately-owned power plants. Initially, the project tenure was for three to five years, but for some projects, the lifeline is about 15 years, which, according to economists, is not judicious at all.
It is common knowledge that it has become a jigsaw puzzle that while government claims addition of 27,000MW of electricity to the national grid and often laying foundation stone of new power stations and also inaugurating new plants’ operation here and there, curiously load-shedding has reached a unbearable scale in recent times crippling the life of the people, forcing mills and factories to close shutters. The country is set for higher growth trajectory (7.5pc) in the next fiscal. 
Controversial indemnity bill
In an article entitled “Bangladesh Energy Sector: Crisis Compounding” dated October 14, 2010, an engineer in a blog opined, “Failing to conclude some major power project contracts following the customary process the AL Government has enacted the controversial indemnity bill for managing power and energy sector contract awards on unsolicited offers”. He cogently questioned, “Why democratic government actions cannot be challenged in court?” [Reference] He is not alone; many people are asking the same question.
But, almost certainly the economy is in a much lower growth path than what is suggested and when the BBS begins to put the accounts together many top economists bristling on the economic border rightly or wrongly think that they’re in for a big surprise. To make things worse, last week power tariff went up: retail consumers are to pay more. It is the second hike this year and the fifth since the AL government took office in 2009. But by many yardsticks, it may not be an equitable solution to all. Besides, the consumers are flatly denied quality service—power supply without interruption. However, the hike, a typical one, is liquid fuel cost adjustment. 
PDB’s losses
The PDB ran a deficit of Tk 40bn in this FY12 with government subsidy of Tk 370 milion only. Government had no other option, as if tariff was not increased, the power board would clock losses to the tune of Tk.560cr for Jan-June period this year, as the prices of diesel and furnace oil (2 basic raw materials to generate electricity) went up by Tk.5 a litre last December. PDB high-ups should also strengthen the internal audit system of the state-owned agency for enhancing management and maintenance efficiency to slash subsidies in the power sector, such as checking the turbine blades at plants like Ashuganj. 
In the current FY, the government is set to allocate Tk.20, 000cr more in subsidies for the sector and according to the Finance Minister in JS, the government already owes Tk.40,000cr to the commercial banks. 
Government will have to bring forward the subsidy burden in the upcoming budget amidst a period when the Finance Minister said at BMA on 31 March that it will take another 8-10 years to anchor a suitable position for our present moribund economy if the political instability persists. 
The chairman of BERC says increased electricity would help the government save about Tk.10bn in annual subsidies. Insiders say, the operators of costlier quick power rental power plants receive more money than their production cost and none knows where the extra amount in billions lands up. 
Very costly quick power stations
And already, government has set up these very costly quick power stations in mid-2010 and reportedly doling out excess subsidies to buy electricity from them at a very exorbitant price. Here lies the jugglery. The first whistle was blown by those smelling rats when it was officially admitted that Tk.20,000cr were spent on subsidy to power sector alone in just four months (Nov 2011 - Feb 2012, far more that the target for the whole running fiscal year). 
As already hinted, prices of petroleum products have skyrocketed especially because of Taka’s falling value. However, the focus should be on reduction of cost of power production to minimise the cost gradually. 
Actually we ought to go for long-term plan instead of quick rental power production method to adjust the price. It is now high time to identify reasons for subsidy and toward that end to identify the leakage of the distribution system of power to reduce cost of power generation. 
Makeshift arrangement won’t work
Meanwhile, the Desco’s managing director has resigned from his post and an AL stalwart said at a meeting of Dhaka Reporters’ Unity that the present Adviser on power sector is no less responsible for the power abyss as he is simply a bureaucrat with no touch with electrical nitty-gritty.  
A sneak peek into past years reflects that the country hears a lot of rhetoric and demagoguery from all quarters on power independence and its long-term planning. Unbelievable it may seem, no such roadmap is on the table addressing all the aspects of power security. Knee-jerk reaction to a serious problem that requires serious study, planning, preparation and implementation dynamics in a continual manner will just make it worse. Any makeshift arrangement is temporary by nature. Despite many master plans by both Petrobangla for gas and PDB for power, no comprehensive and clear guideline has been in place by either agencies or the concerned ministry. 
2013 or 2015?
On Feb 13,2012, the cabinet secretary disclosed to newsmen that there would be no more load-shedding during the 2013 summer and only 2 months ago, the Finance Minister told in a seminar that the power crisis would only end by 2015.This is confusing. To weather a power crisis, the generating capacity is to be 20pc above the peak demand time —-5pm  to 11pm but at that time unnecessary street, garden lights, illumination in large hotels, eateries, malls, showrooms, billboards, air-cooling in government buildings are not rationed and many areas and gardens are awash with lights even at 10am! 
One authority says the peak hour demand in 2012 is about 7,500MW, another says it is 6,000MW during this summer. Is the PDB doing its homework correctly or the public are misinformed? Prayers for new connections specially at buildings developed by builders were kept pending for a long time but later it was known that connections are only available at a certain premium, no matter how old the application is.
However, public want a realistic picture of the supply and demand in power and with so many sources of power generation in place, why has the load-shedding intensified and which areas are not affected at all over 24 hours. Then why did the PDB sit idle for one year after the AL came to power and if it was prudent to go for high-cost rental power stations on deals that smell highly fishy or shady?
Fate of two MoUs, joint venture
Furthermore, after inking two MoUs by PDB and India’s NTPC to build a 1,320MW coal-fired power plant at Khulna and Chittagong under a joint venture was abandoned. Why? The fate of the one at Barapukuria, Dinajpur, near the coalmine, also remains unknown. Then again in August 2010, another joint venture was to install 3 thermal power projects, each of 1500MW at Chittagong, Barisal and Khulna, to alleviate the country’s nagging electricity shortage on 50-50 equity basis. These were to produce under Build, Own & Operate (BOO) basis about 1,088MW of electricity by 2014. Can we know their present status? 
That said, can we now request the authorities concerned to clarify the fluid situation? Be that as it may, to dwell upon the worrying power sector scenario, albeit in brief, the PDB told the government early this year that unless there is cash incentive to operate the 14 liquid fuel-based rental plants during this summer, the country will experience a 5-hour power outage everyday. 
Huge cost to wreak havoc
Competent sources in the finance ministry say that it could provide Tk.5,400cr as subsidy but it cannot produce more than 5,330MW against the demand for 7,233MW during the irrigation season. As of now government signed 50 contracts to install 52 power plants with or without tender. Experts, not bureaucrats, point out that sans any fuel price change, government with an empty coffer will have to manage subsidies worth $2-3bn on the fast climbing prices of fuel oils imported by BPC.
The power sector needs one lakh metric tonnes of liquid fuel oil to generate power from the rental units. There is a note of caution. An additional cost of power generation would cost between Tk.52-56bn this year, 2012, wreaking havoc on our economy which already is in a tailspin. Obviously, our job is cut out for a crucial situation. So, all concerned will have to sit across the table to arrive at a viable solution. 
Last but not least, it is advisable that the incumbents adopt effective steps to harness renewable energy sources such as solar, wind, geothermal, biomass and hydropower.
BY : Ghulam Murshed.