Govt moves to curb power generation costs

In a bid to rein in soaring electricity subsidies and generation costs, the government has initiated a plan to reduce expenditure at power plants where it holds full or partial ownership, officials said.

The initial focus will be on trimming operating and maintenance (O&M) costs through discussions and negotiations with state-owned power companies and joint ventures in which the government has substantial stakes.

Entities under review include major state-run firms such as Bangladesh Power Development Board (BPDB), Electricity Generation Company of Bangladesh Ltd (EGCB), Northwest Power Generation Company Ltd (NWPGCL), Ashuganj Power Station Company Ltd (APSCL), and Coal Power Generation Company of Bangladesh Ltd (CPGCBL).

Joint venture companies involving state entities and foreign partners include Bangladesh China Power Company Ltd (BCPCL), Bangladesh India Friendship Power Company Ltd (BIFPCL), and RPCL-NORINCO International Power Ltd.

Officials said a committee formed by the Power Division has already recommended slashing the return on equity (ROE) of state-owned plants to around 6.0 per cent-down from the current 12 per cent.

The prevailing ROE is notably higher than global standards, a senior BPDB official told The Financial Express on Wednesday.

Additionally, the committee has proposed reducing the O&M costs of state-run plants by 20-30 per cent.

State-owned NWPGCL and APSCL are reportedly close to signing deals with the Power Division to implement these cuts, a senior official of the division under the Ministry of Power, Energy and Mineral Resources (MPEMR) said.

For joint venture plants, the committee suggested lowering the ROE to 10-12 per cent from the current range of 16-18 per cent.

These cost reduction efforts in public sector power plants are expected to contribute to the government's broader goal of cutting overall electricity generation costs by 10 per cent-a benchmark set in the national budget, according to sector insiders.

Meeting this target could help reduce the estimated Tk 110 billion subsidy currently allocated to the power sector. According to Ministry of Finance data, power subsidies currently amount to around 1.0 per cent of the country's gross domestic product (GDP).

Separately, the interim government has already taken action to reduce electricity generation costs in the private sector by lowering the service charge on high-sulfur fuel oil (HSFO) imports to 5.0 per cent from the previous 9.0 per cent for privately-owned power plants.

Back in 2011, the government first allowed a few private operators to import HSFO. Over time, most were permitted to do so with a 9.0 per cent service charge that covered transport, taxes, and evaporation losses.

Two national committees are also working to reduce generation costs in private-sector plants by renegotiating tariffs and associated charges, sources said.

These committees are expected to submit final reports soon to accelerate the government's cost-cutting drive.

The committees are headed by Dr Md Kamrul Ahsan, a retired professor of Bangladesh University of Engineering and Technology (BUET) and currently a distinguished professor at Green University of Bangladesh, and Moinul Islam Chowdhury, a retired judge of the High Court Division.

Azizjst@yahoo.com