The power sector is suffering from a crisis in both taka and foreign exchange. The government is about to increase the price of electricity once again to meet the taka shortfall. This may give the Power Development Board (PDB) a degree of relief in paying the outstanding dues to the local power plants. However uncertainty prevails over the arrangement of dollars to pay the bills for the Indian power plant and also to meet fuel import costs. And so there remains apprehension of loadshedding this summer.
Sources in the power division say, there is now shortage in production capacity to meet the power demands. However, there is a shortfall in the supply of coal, liquid natural gas (LNG) and fuel oil (diesel, furnace oil) for power production. Consumers had to suffer from extensive loadshedding last two summers due to the inadequate supply of fuel. The electricity prices were hiked thrice before summer last year, but even then an uninterrupted supply of power couldn’t be ensured.
The estimated maximum demand for power this summer is 17,800 MW. The demand has gone up by 11 per cent compared to last year. And the power production capacity has also increased at the same rate. However, like last year, this time too, a large part of the capacity may remain idle due to lack of fuel. Even during the peak demand period, 25 per cent of the capacity remained idle. Other than this, 15 to 20 per cent of the capacity is regularly halted for maintenance purposes. But, according to the contract, whether the power plant is in operation or not, rent for the plant has to be paid. This is known as capacity charge. Last fiscal PDB paid an additional Tk 260 billion in power plant rental. According to the Centre for Policy Dialogue (CPD), last year 41 per cent of the capacity remained idle.
According to agreement, PDB purchases power from all power plants. After that it sells this at wholesale prices to six distribution companies who then supply this to the consumers at retail rates. The present price of electricity per unit on average is Tk 8.25. The wholesale price is Tk 6.70. PDB officials say that is subsidy is to be lifted from the power sector, then the wholesale rate will be Tk 12.11. That means at the consumer level the price will be around Tk 15 on average. The power division wants to raise the price in phases rather than in one go. A circular may be issued shortly to increase the wholesale and retail price of power in one phase from March.
Director general of the power division’s policy research organisation, Power Cell, Mohammad Hossain, told that production plans have been drawn up keeping the maximum demand in mind. If the production cannot be ensured as planned due to fuel, there may be loadshedding. Consumers accept up till 500 MW to 1000 MW of loadshedding. But if prices can be adjusted, then that may give PDB some relief.
Increase in power plants and worries too
Loadshedding has already begun to an extent in areas outside of Dhaka even before the onset of winter. Even on 20 February there was a maximum 388 MW of loadshedding. But this was mostly in areas under the country’s largest power distribution agency, the Rural Electrification Board (REB). They supply electricity to most villages of the country. REB says they are having to carry out loadshedding as they supply is less than the demand. This is mostly in Mymensingh. They say, last year there was even a maximum of 3000 MW loadshedding on certain days. This led to two to three hours of load shedding in Dhaka and eight to ten hours in some rural areas.
Generally speaking, the demand for power begins to increase in March. This continues on until September. Due to the monsoon, the demand falls somewhat in June-July. The highest demand for power is in April. The highest power production in the country so far has been on 19 April last year.
At 9:00pm on 19 April the 15,648 MW of power had been generation. Even so, the demand was not met and 428 MW of loadshedding had to be carried out. During the peak generation period, 6,252 MW comes from gas, 5,593 MW from fuel oil, 2,668 MW from coal, 70 MW from hydroelectricity, and 1,085 MW from imports.
Last year the power generation capacity was 22,566MW. The present capacity is around 25,000 MW. As the demand is lower now, a maximum 10,000 MW is being generation a day.
People are under pressure of inflation. If the price of power is hiked now, their monthly electricity bills will increase. This may also lead to prices of commodities increasing in the market. Such pressure may prove to be intolerable for the consumers
Uncertainty in fuel supply
Like last year, this year too there is uncertainty concerning fuel supply. Power generation at low costs entails the use of gas. The demand for gas in the power sector is around 2.32 billion cft. Last year the maximum supply of gas was 1.30 billion cft. Presently the supply is 850 million cft. PDB asked for at least 1.5 billion cft per day this summer. Petrobangla sources say there is little scope of increasing the gas supply from last year. That means, the highest generation from gas this time may be around 6,500 MW. Generation capacity remains at around 11,000 MW at present. Outside of that, power is being supplied on a test basis from two gas-fired plants. The capacity of these two is over 1000 MW.
Last year over 5,500 MW of power was generated from fuel oil. PDB wants to generate 4,500 MW to 5000 MW this time. There is a capacity of 7,300 MW from fuel oil. Steps have been taken to pay the outstanding dues owed to the power plants. The central bank has issued Tk 120 billion in bonds in the meanwhile. There is another Tk 150 billion due for the private sector power plants. This pressure of the debts and dollars may hamper import of fuel oil for the power plants.
It is the coal-fired power plants that have created the most opportunity this time. Last year the capacity of power generation from coal was 2,692 MW. But coal could not be imported due to the dollar crisis. The two large power plants, Payra and Rampal, had to be closed down twice. The coal-fired capacity including that of Adani’s power plant, has reached almost 6,000 MW. Coal is low-cost in the global market, but it is not being possible to increase coal-fired power generation. Bills are overdue in most of the coal-fired power plants.
Power plant sources say that there is around Tk 90 billion due in unpaid bills to the 1,320 MW Payra power plant in Patuakhali. That is why even though there is a clause to play the coal bill six months late, they are still unable to make regular payments for the coal. The foreign coal companies are sending in letter urging for the payments of the bills along with interest. No bill has been paid till date to the Banshkhali power plant in Chattogram.
The 1,600 MW Adani power plant in Godda of Jharkand, India, regularly supplies electricity, but the monthly bill of this largest coal-fired plant is around 80 million to 90 million dollars. They are sometimes being paid bills of 3 million to 5 million dollars. The unpaid dues have accumulated to over 500 million dollars. It will be hard to keep up production if the bills pile up like this.
Former president of the private sector power plants owner’s association, Bangladesh Independent Power Producers Association, Imran Karim, told that even after issuing bonds, bills of four to five months remain due. The dues cannot be increased further, the bills must be paid every month regularly. The availability of the dollar must also be ensured. If not, the power situation will be worse than last year.
Situation worsens
Experts say, people are under pressure of inflation. If the price of power is hiked now, their monthly electricity bills will increase. This may also lead to prices of commodities increasing in the market. Such pressure may prove to be intolerable for the consumers. That is why PDB can look to cutting production costs rather than hiking prices. They can curb production from fuel oil and turn to gas and coal to cut costs.
Power plants sources say, the government took all sorts of initiatives last year too to pay the bills before summer. But even then, like now, four to five months’ bill remained overdue. Also, last year Bangladesh provided at least 50 per cent of the dollars for fuel imports. Even then there was loadshedding. This time the dollar crunch is worse and so there is likely to be loadshedding this time too.
Special energy-related assistant to the former caretaker government chief advisor, M Tamim, told, rather than reducing expenditure, the additional productions costs are being placed in the consumers. The government can curtail subsidies by hiking power prices in this manner, but this will not resolve the dollar crisis. The fuel import problem will not be resolved either. It will not be possible to prevent loadshedding by increasing the price of electricity.
