Energy crisis overshadows gains in power generation

The milestone achievement attaining 15,000 MW electricity generation capacities was overshadowed this year by the perennial gas crisis that plagued the industrial sector for much of 2016.
Experts have lauded the government’s continual initiatives to increase the capacity of electricity generation, but pointed out that without appropriate provisions for electricity distribution, the electricity generated might become useless.
Energy experts also said with dwindling gas reserves and procrastination in finding feasible energy alternative(s) to gas, the future of the country’s energy sector still looks bleak.
The reduction in the price of oil in line with the prices in international markets was also discussed throughout the year. The government had reduced the price on one occasion, but did not fulfil its pledge to gradually reduce it in three phases. The lack of response of the international oil companies (IOC) for conducting hydrocarbon explorations in three off-shore blocks even after repeated attempts by the government was also in discussion along with energy giants Chevron’s plan on divesting its assets in Bangladesh to counter an energy-price slump. 

Meanwhile, mega projects like the Rampal coal-based power plant and Rooppur nuclear power plant have stirred controversy amongst a large chunk of common people and experts alike, putting a question mark on the government’s intentions of achieving sustainable energy and power development. According to experts, Bangladesh’s gas  sector has been in a shambles for the past few years, as gas connections to new industrial and commercial units have virtually been suspended.
There had been confusion and lack of clarity about cessation of gas connections to the industrial and commercial sectors. The government stopped giving gas connections to the sectors from July 31, 2009.
However, a high-level committee was formed to settle a few urgent appeals from various quarters. The committee approved 200 appeals from the industrial and commercial sectors. But nearly 900 applications are still pending.
The energy ministry announced in 2015 that no industrial gas connection would be given other than to units located in specific industrial zones. Then again, finance minister Abul Mal Abdul Muhith, in a pre-budget discussion, said a provision would be kept in the 2016–17 budget to reserve 2 per cent gas for new industrial units. Nothing of that sort has been done as yet. Also, bucking the trend of the last few years, the allocation for the power and energy sector has been reduced in the budget for the 2016–17 fiscal year. A total of Tk. 15,035 crore has been allocated to the sector in the proposed budget of 2016–17 as against Tk. 16,614 crore in the revised budget of FY 2015–16. This is a decrease of 9.5 per cent.
Experts said there were several reasons for this relatively smaller budgetary allocation for the power and energy sector. These included the government’s intention to grab more private investment rather than spend from its own funds, failure to spend money from last year’s budget and the decreasing price of oil in the international market.
In the past few fiscal years, except the outgoing one, the government has been subsidising the Bangladesh Petroleum Corporation (BPC) with huge amounts of money. In the outgoing fiscal year, the government had allocated Tk. 800 crore as subsidy to the BPC. The state-run corporation, however, had to spend that amount and make a profit because of reduced oil prices in the international markets.
Therefore, the government had decided against allocating any subsidy to the energy sector this fiscal year. In this year’s budget, the Power Division has been allocated Tk. 13,062 crore, while the Petroleum and Mineral Resources Division will get Tk. 1,973 crore. The respective figures for 2015–16 were Tk. 15,494 crore and Tk. 1,120 crore.
Interestingly, the BPC has, for a long time, not been considering these loans as “loans” but as “subsidies” from the government. The Finance Division has written letters to the BPC, reminding it of its outstanding debts. 
Instead of making an attempt to pay off its outstanding debts, the BPC, in its replies, has asked for transformation of these loans into subsidies. The tug-of-war between the BPC and the Finance Division is worsening. Many people inside the government consider this a grievous problem with the state machinery. Meanwhile, the government’s plan of implementing the coal based power plant in Rampal area near Sundarban has sparked controversy. The coal based super critical power plant, which has been delayed significantly from the original plans of commissioning by 2016, is not only become harmful to Sundarban but also be very expensive.
The plant is set to receive subsidies worth over US$ 3 billion over its life in the form of income tax and operational subsidies from the Bangladeshi government and a soft loan from the Indian government-owned EXIM Bank. Despite this massive subsidy, the cost of electricity produced from the plant will be more than 30% in excess of the average cost of electricity in Bangladesh, experts said.
At the same time the implementation of Rooppur Nuclear Power Plant, the first ever nuclear power plant project of the country also raises question as Bangladesh will have to repay around $20 billion against its loan of $11.38 billion from Russia for implementing the 2,400MW Nuclear Power Plant.
The Russian supplier’s credit, signed on July 26 in Moscow, carries 1.75 per cent interest plus LIBOR — London Interbank Offered Rate—with a 30-year repayment period including 10 years’ grace period.
The total cost of the project has been estimated at $12.65 billion, of which Russia agreed to provide 90% in loan. As per the current LIBOR which is 0.9%, Bangladesh has to give back $18.23 billion.
If LIBOR is increased, then Bangladesh has to give back more money. However as per the contract, no matter how much LIBOR has increased, the cumulative interest rate cannot be more than 4%. In that case, Bangladesh will at most need to repay around $20 billion to Russia.
Terming that amount ‘too much’, the experts concerned have raised the feasibility of going ahead with this ambitious plan.

Energy crisis overshadows gains in power generation

The milestone achievement attaining 15,000 MW electricity generation capacities was overshadowed this year by the perennial gas crisis that plagued the industrial sector for much of 2016. Experts have lauded the governments continual initiatives to increase the capacity of electricity generation, but pointed out that without appropriate provisions for electricity distribution, the electricity generated might become useless. Energy experts also said with dwindling gas reserves and procrastination in finding feasible energy alternative(s) to gas, the future of the countrys energy sector still looks bleak. The reduction in the price of oil in line with the prices in international markets was also discussed throughout the year. The government had reduced the price on one occasion, but did not fulfil its pledge to gradually reduce it in three phases. The lack of response of the international oil companies (IOC) for conducting hydrocarbon explorations in three off-shore blocks even afterrepeated attempts by the government was also in discussion along with energy giants Chevrons plan on divesting its assets in Bangladesh to counter an energy-price slump. Meanwhile, mega projects like the Rampal coal-based power plant and Rooppur nuclear power plant have stirred controversy amongst a large chunk of common people and experts alike, putting a question mark on the governments intentions of achieving sustainable energy and power development. According to experts, Bangladeshs gas sector has been in a shambles for the past few years, as gas connections to new industrial and commercial units have virtually been suspended. There had been confusion and lack of clarity about cessation of gas connections to the industrial and commercial sectors. The government stopped giving gas connections to the sectors from July 31, 2009. However, a high-level committee was formed to settle a few urgent appeals from various quarters. The committee approved 200 appeals from the industrial and commercial sectors. But nearly 900 applications are still pending. The energy ministry announced in 2015 that no industrial gas connection would be given other than to units located in specific industrial zones. Then again, finance minister Abul Mal Abdul Muhith, in a pre-budget discussion, said a provision would be kept in the 201617 budget to reserve 2 per cent gas for new industrial units. Nothing of that sort has been done as yet. Also, bucking the trend of the last few years, the allocation for the power and energy sector has been reduced in the budget for the 201617 fiscal year. A total of Tk. 15,035 crore has been allocated to the sector in the proposed budget of 201617 as against Tk. 16,614 crore in the revised budget of FY 201516. This is a decrease of 9.5 per cent. Experts said there were several reasons for this relatively smaller budgetary allocation for the power and energy sector. These included the governments intention to grab more private investment rather than spend from its own funds, failure to spend money from last years budget and the decreasing price of oil in the international market. In the past few fiscal years, except the outgoing one, the government has been subsidising the Bangladesh Petroleum Corporation (BPC) with huge amounts of money. In the outgoing fiscal year, the government had allocated Tk. 800 crore as subsidy to the BPC. The state-run corporation, however, had to spend that amount and make a profit because of reduced oil prices in the international markets. Therefore, the government had decided against allocating any subsidy to the energy sector this fiscal year. In this years budget, the Power Division has been allocated Tk. 13,062 crore, while the Petroleum and Mineral Resources Division will get Tk. 1,973 crore. The respective figures for 201516 were Tk. 15,494 crore and Tk. 1,120 crore. Interestingly, the BPC has, for a long time, not been considering these loans as loans but as subsidies from the government. The Finance Division has written letters to the BPC, reminding it of its outstanding debts. Instead of making an attempt to pay off its outstanding debts, the BPC, in its replies, has asked for transformation of these loans into subsidies. The tug-of-war between the BPC and the Finance Division is worsening. Many people inside the government consider this a grievous problem with the state machinery. Meanwhile, the governments plan of implementing the coal based power plant in Rampal area near Sundarban has sparked controversy. The coal based super critical power plant, which has been delayed significantly from the original plans of commissioning by 2016, is not only become harmful to Sundarban but also be very expensive. The plant is set to receive subsidies worth over US$ 3 billion over its life in the form of income tax and operational subsidies from the Bangladeshi government and a soft loan from the Indian government-owned EXIM Bank. Despite this massive subsidy, the cost of electricity produced from the plant will be more than 30% in excess of the average cost of electricity in Bangladesh, experts said. At the same time the implementation of Rooppur Nuclear Power Plant, the first ever nuclear power plant project of the country also raises question as Bangladesh will have to repay around $20 billion against its loan of $11.38 billion from Russia for implementing the 2,400MW Nuclear Power Plant. The Russian suppliers credit, signed on July 26 in Moscow, carries 1.75 per cent interest plus LIBOR London Interbank Offered Ratewith a 30-year repayment period including 10 years grace period. The total cost of the project has been estimated at $12.65 billion, of which Russia agreed to provide 90% in loan. As per the current LIBOR which is 0.9%, Bangladesh has to give back $18.23 billion. If LIBOR is increased, then Bangladesh has to give back more money. However as per the contract, no matter how much LIBOR has increased, the cumulative interest rate cannot be more than 4%. In that case, Bangladesh will at most need to repay around $20 billion to Russia. Terming that amount too much, the experts concerned have raised the feasibility of going ahead with this ambitious plan.