Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
Despite having built up an over-capacity of power generation in the energy sector), the past government did little to ensure a cheap and reliable supply chain of primary energy, over which it would have total control. That is the irony of the $460 billion dollar economy in Bangladesh. Opinions differ about actual demand for power in the country, but it is around 16,000 MW (megawatts). Despite this, power plants were built and commissioned and today, the grid connected power generation capacity stands at slightly above 27,000 MW. Over the course of the last one year or so, the past government has had to take expensive high-interest, short-term loans from international lending institutions simply to defray payments for energy purchases. A ridiculous situation and one that threatened macro-economic stability in the mid to long term!
According to an article published in Energy & Power magazine: "The highest-ever generation was 16,477MW on 30 April 2024. In the peak hours on that day, the deficit was 1,000MW. The unit cost of generation in FY 2022-23 was Tk 12.13. The average power tariff was Tk 7.04 per unit" On top of that, the erstwhile government had decided that subsidy on power sector would be removed in phases within the next two years. It is the bulk and retail consumer who would bear the burden of subsidy withdrawal. While consumers could curtail energy consumption by reducing usage, energy-efficiency transformation of industry cannot happen overnight and there is also a cost factor involved.
The arrogance with which the ministry of power & energy and policymakers had ramrodded the entire process was sad to see. The explanation, if any, was that utility companies were running into billions of Taka worth of losses and these had to be covered with ever-increasing rise of tariff. During the golden days of economic development, subsidies on power increased by leaps and bounds in the name of "capacity payment". According to a study by the Centre for Policy Dialogue (CPD), over the last seven years, capacity charge jumped from Tk50 billion to Tk320 billion.
One would have thought that with so much financial outlay, generation cost would be managed. The Bangladesh Power Development Board (BPDB) "forecasted that the generation cost would be reduced to Tk10.50/unit." Why so? Because one major element in all these calculation was not shared publicly. Yes, the power generation capacity (on paper) increased dramatically over the last 14 years, but as experience had shown that little thought had gone into awarding of contracts. There was no audit to calculate whether contracted power companies were actually delivering stated power outputs as per contract. The only thing that mattered was awarding of contracts with zero oversight and this is what has landed the nation in the mess it is in today!
As pointed out by a member of the Bangladesh Energy Society, the capacity charge clause necessitated the unnecessary payment on huge reserve margins that shot up the generation costs. This is supported by the fact that the former state minister of energy had informed the last parliament that the government had to pay beyond Tk 1,000 billion as capacity charge for the past 13 years. Perhaps it was a pipedream that policymakers believed in that international markets for three primary energy sources: liquid fuel, coal and LNG would remain stable for eons to come. It simply goes to show that greed overtook common sense and the economy had become dependent on an energy plan that could be undermined at any time.
Every nation strives for energy self-dependence, regardless of the source of energy. In the case of Bangladesh, it was fortunate to have gas and coal reserves - but these are finite resources, regardless of the reserve size. Yet, we have witnessed the obtuseness of policymakers in making energy plans that was focused on making the country import-dependent while disregarding the very basics of energy-efficiency, curbing wastage and unbridled corruption that would overwhelm the state of finances within a short period of time.
The current government has landed on this mess and it must tackle the severe energy crisis. Much has already been written on the formation of a banking commission to deal with the runaway corruption in the financial sector. It is time to form a proper energy audit commission comprising renowned energy experts of the country and people who understand the energy affair. The task of this commission would be to sift through the evidence of how and where subsidies went, who got what under "capacity charge" and precisely, what is the actual power generation capacity of the various power plants commissioned. Only with such data in hand, can a proper energy policy be formulated and the road to recovery may begin. Recovery will be both painful and time-consuming but this can no longer wait.