Will bond help overcome crisis?

According to a report carried in this newspaper recently, the government intends to issue bonds worth Tk120 billion "for paying piled-up electricity bills to independent power producers (IPPs) against capacity charge and other payments, officials said."Going by information shared by bankers privately, top management of several banks are not particularly enthusiastic about buying into this sort of bond. The rationale being why would privately-owned banks spend their hard-earned profits to buy a bond with 7.5 per cent yield? There will, however, be many banks that will buy the bond.

It took one general election and a change at the helm of affairs at the top in the ministry of finance to do what should have been done years ago. But better late than never. Banks that have accounts of independent power producers (IPPs) will be ready to take up the offer of the bond. It remains to be seen whether other banks will follow suit. From information shared with the media by the ministry, vast sums of money are owed to IPPs by the government. This amounts to around Tk230 billion and it has now increasingly become clear that these dues will not be cleared unless something drastic is done. The bond apparently is the answer.

While some pronouncements have come from policymakers that subsidies on power will soon have to go. The question now being asked is, why would industry / business pay for uneconomically-produced power, the cost of which would be so high (without subsidies) that it would make no sense to procure it in the first place! While the ordinary citizens of this country have no choice but to pay for power at whatever price the agency on behalf of the government  sells it (since it has full monopoly over power produced in the country), the same cannot be said for producers. Producers and manufacturers in the country make the goods that help the wheels of the economy go round. They are large tax payers that fill state coffers, and they fill nearly half the seats in parliament. So yes, they have a say in how things are run in this country.

The Electricity and Energy Supply (Special Provision) Act 2010 enacted at the time of power crisis is not needed anymore. In fact, that particular black law has become irrelevant for many years now. Yet, contracts have been sustained with no termination in sight allowing lining of pockets of entrepreneurs (and God knows who else) with public money that could have been better spent elsewhere.

The first order of business in parliament should be to rid the land of this special provision with its "no questions asked" clause. Rather, it is this particular piece of legislation that is to a large extent responsible for the fiscal mess the country is in today, where the government is forced to float a bond to get out of the financial burden thrust upon it - a situation that benefitted a handful of individuals at the cost of the millions and the economy at large. If indeed, Bangladesh is to cherish a government "for the people, by the people", then surely that law will have to go. Otherwise, it is simply "business as usual" and the rot will continue until there is nothing left to salvage.

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