Govt releases big sum to pay off private power plant dues

A clean chit up to April on huge leftover arrears cost Tk 600 billion as the interim government doubled the state subsidy to pay off the overdue bills to private-sector power producers, officials said.

In order to clear all the much-talked-about capacity charges and electricity bills, the government already jacked up the power-sector subsidy to Tk 620 billion from Tk 360-billion allocations in the original budget for the outgoing fiscal year (FY) 2024-25, they said Friday.

"We have so far released nearly Tk600 billion worth of funds as power subsidy to pay the arrears to the private-sector rental and independent power producers (IPPs)," says a Ministry of Finance (MoF) official.

"After getting bill of the remaining two months of the current fiscal year (FY) 2024-25, we will provide the remaining arrears shortly," he adds about the contingencies aimed at averting any major power breakdowns.

As a matter of set practice, after getting power-supply and other bills from the Bangladesh Power Development Board (BPDB), the MoF usually scrutinises those and then releases the necessary funds.

A hefty sum of subsidy in the revised budget has given a big respite to Bangladesh government as it has already paid a good amount of overdue bills to the private power producers, officials said.

All 133 private and public-sector power stations across Bangladesh have a combined generation capacity of nearly 20,697 megawatts a day. Out of the total, 78 private-sector power plants has a production capacity of nearly 8,778mws a day.

Besides, BPDB imports 1,160mw power from India where Adani power station from Jharkhand alone supplies nearly 750 megawatts a day.

Finance ministry and power division officials said the government would be paying all the arrears and dues to the IPPs and rental power plants gradually by next FY2026.

The interim administration of Prof Muhammad Yunus has decided to repay off the outstanding capacity charges, power-purchase bills and other liabilities to the local and foreign IPPs and rental electricity producers.

Among the producers are Indian Adani Power, Bangladesh-China Power Company Plant (Payra power plant), Meghnaghat 450mw Power Ltd, 210mw Rural Power Co Ltd, 335mw Summit-Meghnaghat Power Ltd and 414mw Sembcorp NWPC Ltd, 145mw Aggreko International Projects, United Power and Doreen Power.

The bills of the rental power plants and IPPs are paid from BPDB's income and the subsidies provided by the MoF.

However, the bills for imported electricity from Adani and other Indian power plants are paid from BPDB's own income.

About the massive Tk620-billion allocation for the power subsidy in the current revised budget, the MoF official says: "We are paying the arrears every month to the private power-plant owners. But the arrears are comparatively higher than our monthly payments. So, we will allocate a higher amount of money in the revised national budget for the current FY2025."

From the next FY, power division would slash the subsidy on power sector drastically and try to ensure loss-free supply within next few years, says the official.

The government in the newly placed national budget has proposed a Tk 370-billion fund as power subsidy for the upcoming FY2026.

Bangladesh purchases power at higher rates from the costly IPPs and the rental-power producers and sells to the consumers at lower rates by way of subsidizing the distribution.

Another MoF official says Bangladesh wants to be a liability-free country to the IPPs and private-sector power plants from the next fiscal year as it has agreed with the International Monetary Fund (IMF) for getting its financial support.

In the last FY2024 revised budget, the government allocated Tk 394.06 billion in subsidy for the power sector.

Data from MoF, BPDB and a non-government research organisation show a total of Tk 783.7 billion had been paid as capacity charges since 2018-19 till 2022-23.

Some Tk 62.41 billion was paid in FY2019, Tk 89.29 billion in 2020, Tk 132 billion in 2021, Tk 240 billion in 2022 and Tk 260 billion paid in FY2023 as capacity charges for private-and rental-power plants.

Such huge capacity payments to IPPs and rentals have become a big burden for the government while struggling with emaciated foreign-exchange reserves and rising external debts.

Banks can ill afford to provide dollars for repayment of dues of the foreign companies in the power and energy sector. The country had forex reserves worth over US$48.0 billion two years back, which depleted to $22 billion in recent days.

Usually, the state-run power board sells electricity to consumers at rates lower than it purchases from the IPPs and the gap needs to be made up with state subsidies.

Most of the IPPs and rental-power plants are HFO- or diesel-based ones which is costly for generating electricity.

The BPDB purchases the electricity from the private-sector plants at costs that vary from Tk 14 to Tk 26 per kilowatt hour (kwh) for feeding into the national grid.

On the other hand, the average retail price of electricity the consumers pay is some Tk 8.95 per unit and the average bulk electricity tariff is Tk 7.04 per unit.

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