[🇧🇩] Energy Security of Bangladesh

[Saif]

Power producers call for clearing dues citing forex losses

Private power producers have urged the Bangladesh Bank for a solution to recover losses stemming from delayed payments by the Bangladesh Power Development Board (PDB).

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Power producers call for clearing dues citing forex losses

Private power producers have urged the Bangladesh Bank for a solution to recover losses stemming from delayed payments by the Bangladesh Power Development Board (PDB).

Members of the Bangladesh Independent Power Producers Association (BIPPA) made this request at a meeting with Ahsan H Mansur, governor of the central bank, at his office in Dhaka yesterday.

The BIPPA members, comprising mostly owners of liquid fuel-based power plants, told Mansur that they incurred combined losses of Tk 8,500 crore due to delayed payments by the PDB following the start of currency fluctuations.

The exchange rate between the taka and the US dollar has been repeatedly revised since August 2021, with the local currency depreciating by more than 30 percent.

"The governor told us they will closely monitor the exchange rate with commercial banks in the future," BIPPA President David Hasanat told The Daily Star.

He said the central bank governor was very cordial and assured him that he would convey their message to senior government officials.

BIPPA has long been pushing the government to clear at least half of its overdue payments, amounting to Tk 9,000 crore, as soon as possible.

They wrote to the Ministry of Power, Energy and Mineral Resources on January 9, requesting that the payments be cleared within 10 days to ensure uninterrupted power supply during Ramadan.

Hasanat said that the unpaid dues are preventing local power producers from importing the furnace oil needed to generate electricity.

"If we don't get at least half of our payments, we will not be able to open letters of credit to import furnace oil in due time to generate adequate power during Ramadan," he added.

In its letter, BIPPA mentioned the significant financial losses being caused by the taka's devaluation.

Besides, the foreign exchange losses of independent power producers were compounded by delayed interest payments.

"These losses have eroded financial confidence among lenders," it said.

Hasanat provided an example of how delayed payments exacerbate foreign exchange losses.

"When we submitted bills [for electricity or fuel imports], the exchange rate was Tk 118. But by the time we received payments, it had risen to Tk 126," he said.

The PDB is obligated under its power purchase agreements to clear payments within 45 days.

However, payments are being delayed for more than five months at a time, with the resulting backlog having persisted for more than three years now.

"The situation is critical," BIPPA said in its letter, adding that the nation's energy supply chain faces imminent collapse if the payments are not made.

This will, in turn, have severe and widespread impacts, jeopardising agricultural production, national food security, industrial output, and essential household services during crucial periods like Ramadan and summer, it added.​

 

[Saif]

Bangladesh’s power subsidies highest among neighbours despite low use

Cement sales in Bangladesh plunged in 2024 due to political instability, rising production costs, and the deferment of the implementation of government infrastructure projects, leaving the industry operating at less than half its capacity.

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Bangladesh’s power subsidies highest among neighbours despite low use

Cement sales in Bangladesh plunged in 2024 due to political instability, rising production costs, and the deferment of the implementation of government infrastructure projects, leaving the industry operating at less than half its capacity.

"The cement sales in 2024 declined due to political instability, macroeconomic challenges, inflation, and the suspension of government infrastructure projects," said Mohammad Iqbal Chowdhury, chief executive officer (CEO) of LafargeHolcim Bangladesh PLC.

Industry experts echoed similar concerns, emphasising that these factors have led to significant disruptions in the construction sector.

Mohammed Amirul Haque, managing director and CEO of Premier Cement Mills Limited, highlighted that the suspension of major infrastructure projects, a key customer of the cement industry, has exacerbated the downturn.

Despite these hurdles, Haque expressed optimism, emphasising that political stability and economic recovery could enable a rebound.

"The cement sector has weathered crises before and stands resilient," he said, underscoring the industry's potential for recovery in the coming years.

Haque further said the cement industry in Bangladesh, a critical driver of the construction sector, is grappling with declining demand and rising production costs.

"Traditionally, around 60 percent of the country's cement consumption is through individual initiatives," said Md Moshiur Rahman Dalim, head of business at Akij Cement Company Limited.

"…the remaining 40 percent is used in government development projects and infrastructure of other organisations," he said.

However, the dynamics have shifted drastically, painting a bleak picture for the sector.

He said cement consumption at the individual level has dropped by over 90 percent.

According to him, this decline can be largely attributed to delays in the issuance of approvals from local government bodies, including city corporations, municipalities, and urban development authorities, which are crucial for construction projects.

People also face hurdles in obtaining necessary clearances due to the absence of elected public representatives in the local government bodies, further stalling individual construction projects, he said.

Bangladesh boasts 42 cement factories with a combined production capacity of 84 lakh tonnes per month, according to the Bangladesh Cement Manufacturers Association.

However, Dalim said sales have plummeted to just 34 lakh tonnes per month, leaving the industry operating at a mere 45 percent of its capacity.

This sector, where annual growth in consumption typically ranges from 9 to 10 percent, saw an unprecedented decline in sales of around 1.2 percent in 2024, he said.

The industry's woes are compounded by soaring costs of production, driven by hikes in electricity and fuel prices, he added.

"We are now in a difficult situation. The same manpower required to produce 10 lakh tonnes of cement is being utilised for just one lakh tonne. Despite the downturn, we have not resorted to layoffs," said Dalim.

Adding to the burden is a discrepancy in import duties on raw materials, he said.

"Although the international price of cement clinker has dropped to $44 per tonne, the government continues to calculate import duty based on a rate of $62 per tonne," he said.

Dalim said this disparity results in an additional cost of nearly Tk 2,000 per tonne. Meanwhile, a 10 percent hike in supplementary duty on limestone has further raised costs.

He said winter, usually the peak season for cement sales, has also failed to deliver relief.

The combined impact of declining demand and increasing costs has taken a toll on the overall construction sector, leaving businesses and stakeholders in a risky position, he explained.

Mohammed Khurshed Alam, executive director of Fresh Cement, a concern of the Meghna Group of Industries, highlighted the severe challenges faced by the cement sector due to declining demand.

Despite rising production costs, manufacturers have been compelled to slash prices by at least 15 percent to survive in an increasingly competitive market, he said.

Alam noted that the manufacturers had turned hypercompetitive, which was a significant factor behind the price drop.

"The sector has been struggling since 2022, with consistent de-growth each year, despite averaging at an 8 percent annual growth since 2010," he said.

Alam attributed the sector's ongoing uncertainties to the absence of an elected government, which has hindered consumer confidence and construction activity.

"People are hesitant to spend money or start new projects, given the prevailing political uncertainties," he remarked.

He expressed hope that the situation would improve once an elected government assumes power and begins implementing large-scale development projects.

"When development projects are launched, and people regain confidence to construct buildings, the demand for cement will naturally rebound," he added.

Until then, the cement and other construction-related industries are likely to remain subdued, he said.​

 

[Saif]

Power, energy sector: No effective steps taken to mend unequal deals

Over five months of the interim government have passed, there are still no effective initiatives to rein in power and energy sector profiteers, undermining the government’s ongoing effort to bring in economic and other reforms.

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Power, energy sector: No effective steps taken to mend unequal deals
Emran Hossain 21 January, 2025, 00:19

Over five months of the interim government have passed, there are still no effective initiatives to rein in power and energy sector profiteers, undermining the government’s ongoing effort to bring in economic and other reforms.

Energy experts said that there were laws to stop the profiteers, unjustly benefitted throughout the past Awami League regime, bleeding the economy under the protection of now-defunct indemnity law.

There are also other ways to get the profiteers to the negotiation table to reduce excessive tariffs awarded to them through unequal power deals and end their many illegal practices, they said.

By continuing to subscribe to the profiteers’ service since assuming power on August 8, 2024, the interim government is rather validating their existence, weakening its own case, energy experts said.

The interim government repeatedly said that the task of cancelling power and energy deals, signed under international law, was tough, especially financially, as it involves the payment of billions of dollars.

‘The government has to realise that allowing the profiteers to operate is even more harmful,’ said economist and rights campaigner Anu Muhammad.

‘Besides pocketing huge profits, the profiteers will ruin environment and public health,’ he said.

Bangladesh suffers from over 50 per cent overcapacity following a more than five-fold expansion of fossil-fuel-based power plants during the AL regime ousted on August 5 amid a student-led mass uprising.

The massive expansion occurred through power deals almost without tender, offering unjustified privileges to power sector investors.

For instance, up to 73 per cent excessive capacity charge was given to many of the companies. During the AL regime, over Tk 1 lakh crore was paid to idle power plants.

If the government wishes to exit a power deal, the government would, in most cases, have to pay 85 per cent of the income that the power plant would have made over its lifetime.

A power plant could last from 15 to 25 years. Bangladesh also spent far more than the other countries in building power plants — $2.4 billion spent in constructing a 1,320MW coal-based power plant. The past government invested $33 billion in its 15 year’s regime in the power sector alone.

The power deals, replete with other privileges, including opportunities to manipulate fuel price, have spared many power producers to pay discount on imported fuel.

‘There are many instruments to prevent these profiteers,’ said Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development, a platform of green activists.

International laws, energy experts said, entertains the concept of odious debt, which defined the national debt incurred by despotic regime as illegitimate debt and there are precedents of countries refusing to pay odious debt. The past AL regime was autocratic as it had rigged the past three elections to hold onto power.

‘We have a clean case of deals passed under pressure or influence or through fraudulent practices, bypassing the public procurement policy,’ said M Abdul Quaiyum, a Supreme Court lawyer, who recently moved the court seeking order to scrap the unequal deal signed with the Adani Power by the past government.

The court ordered the government review the Adani deal and report to it by January 25.

The government is also under instructions from the High Court to review all power, energy deals since the indemnity law used to pass the deals was declared illegal.

Many power, energy deals require investors to follow the country’s existing laws, which were generally overlooked during the AL regime, apparently to maximise the profits of AL favourites.

For instance, the 1,234MW coal-based Rampal power plant, a joint venture with India, operated for almost two years till the past year without using effluent treatment plan, releasing wastewater directly into the River Maidara.

Coal is handled openly at the Rampal, leading to its direct release into the air and river while facilities such as coal-shed, coal stack yard and ash silo were not completed as per the plan.

Power plants are supposed to renew their environmental certificate and environmental management plan every year. The DoE is supposed to update the list of environment certificate by March 31 every year. The DoE also has the responsibility to assess industries’ ability to assess environmental impacts and implement their environmental management plan.

Department of Environment director Masud Iqbal Md Shameem claimed that power plants regularly updated their environmental certificates.

He, however, failed to provide an account of such certificates renewed this year.

SC lawyer Qazi Zahed Iqbal said that treaty signed under international law could be challenged or even have declared void for contradicting or violating domestic law.

‘Deals going against domestic law will have no legality. Environment is protected by the constitution,’ he said.

Energy experts also called on the government for withdrawing numerous special privileges still being enjoyed by power plants to let their authorities know about its uncompromising stance and bring them to the negotiation table.

Power plants have 100 per cent tax exemption on their income until 2034. Their foreign employees and consultants enjoy income tax exemption. Power companies do not pay tax on interest paid under loans. Supplementary and import duties on machinery and spare parts are also exempted. Coal importer’s tax was reduced to 5 per cent from 15 per cent.

Private furnace oil importers often use their half capacity to be illegally benefited by the provision of 9 per cent service charge. A BPDB account showed that Bangladesh had spent 20 per cent extra on furnace oil import during the AL regime. Many companies are also using fake offshore companies to import furnace oil to avoid paying 25 per cent customs duty. There are also allegations about companies importing more furnace oil than they need to generate power.

‘Widespread corruption must have left many cues to hold the profiteers accountable. The government just needs to launch a thorough investigation,’ said Sharif Jamil, coordinator of the Waterkeepers Bangladesh, which works to protect the water and water bodies in Bangladesh.

Experts said that there were also amicable ways of settlement by simply inviting all power and energy businesses to talks. Many power plants have been in operation for 15 years though they earned a handsome profit on their investment in the first three to five years.

Consumers Association of Bangladesh energy adviser Shamsul Alam refused to accept the government’s excuse that there were not many ways to come out of power and energy deals.

‘What kind of law allows such injustice to continue?’ asked Shamsul.

‘The power plants were built in violation of laws, allowing stealing from people’s pocket. Are we saying there is no way to stop that?’

BPDB chairman Rezaul Karim said that several committees were working on the matter to find out unnecessary deals and the way of getting rid of them.

‘We cannot give a precise date when we can do that,’ he said.​

 

[Saif]

Renewable ambitions still mired in uncertainty

Although the Awami League government made ambitious commitments to renewable energy before being ousted by a mass uprising in August last year, meeting those lofty goals remains a distant dream for the country.

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Renewable ambitions still mired in uncertainty
Bangladesh produces only 0.8% of total power from sustainable sources

Although the Awami League government made ambitious commitments to renewable energy before being ousted by a mass uprising in August last year, meeting those lofty goals remains a distant dream for the country.

The interim government has been trying to accelerate the transition, but experts and businesses have voiced concerns that the new tenders, which do not feature implementation agreements, may hold back progress.

According to an analysis by the Bangladesh Independent Power Producers' Association (BIPPA), Bangladesh produces the least electricity from renewable sources compared to four other comparator countries, including India, Pakistan, Vietnam and Sri Lanka.

Bangladesh's power generation mix is skewed heavily towards fossil fuels, with only 0.8 percent of energy being produced through renewables.

The nearest competitor, Pakistan, gets 3.7 percent of its total 42,131 megawatts (MW) of installed capacity from renewables, according to the findings, which were shared with senior government officials on Monday at Rail Bhaban.

The comparison was based on data till June 2024.

At present, Bangladesh has a total installed capacity of 27,115MW, with solar and wind contributing 663MW.

According to the findings, Vietnam is leading the charge towards renewables, followed by India and Sri Lanka.

In a fresh push, Bangladesh entered the renewable energy era in 2017 with the launch of a 3MW solar power plant in Jamalpur's Sharishabari.

The Awami League government later set a global commitment to producing 6,000-16,000MW from renewable sources by 2030, but neglected due process when it came to giving primary approval.

However, after the political changeover in August, the interim government scrapped the plans for a total of 42 power plant projects, including 37 renewables plants with a combined capacity of around 3,102 megawatts (MW).

This is because those plants were awarded without any due tender process by the Awami League government under the controversial Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010.

The interim government also repealed the "indemnity act" in December.

Additionally, under the interim government, the National Board of Revenue granted a 15-year tax benefit for investments to establish grid-tied renewable energy-based power facilities, with a 10-year exemption to encourage the bidders.

The PDB has also floated two tender notices till date for 22 solar plants in different areas of the country with a total capacity of 853MW. The tender submission deadlines for those notices are in early February and March this year respectively.

Shahriar Ahmed Chowdhury, director at the Centre for Energy Research at United International University, told The Daily Star that the previous government always said it would increase renewable energy installation, but those words were insincere.

"Renewable energy installation is good for the nation in the long run as fuel cost will reduce in proportion with renewable use," he said.

Imran Karim, former president of BIPPA, who prepared the analysis, said land scarcity is the main reason solar projects are being held back.

"As a densely populated country, land acquisition is the biggest challenge in implementing renewable projects," he said.

He pointed out another major decision by the government that had caused investors to refrain from joining the tender process.

He said the new tender documents read that the government will not sign implementation agreements, under which the government assures repayments if the PDB defaults.

"That means the companies will only sign power purchase agreements with the PDB. You will rarely find lenders or investors who will agree to invest in a company that they know cannot repay them on time," Karim said.

Currently, the PDB owes around Tk 21,000 crore to independent power producers in overdue payments.

Besides, he said, the PDB sells power to customers for prices lower than their purchase cost or production cost, meaning it is not possible for them to pay bills unless the government underwrites it.

Karim, also the vice-chairman of Confidence Group, which owns several heavy fuel oil-based power plants, said they wanted to support the government's move towards renewables.

"But when we spoke to multilateral banks and development partners, we found out that they may not finance such projects."

Despite repeated attempts over the phone, Muhammad Fouzul Kabir Khan, adviser to the ministry of power, energy and mineral resources, could not be reached for comment.

Energy expert Shahriar Chowdhury said the decision to not ink implementation agreements is contrary to the government's commitment to increasing power generation from renewables.

"Fossil fuel-based power plants have been getting such benefits for a long time. If you want to compete with them, you [the government] should support the renewable investors for a certain time till the situation improves," he said.

"We have made very little progress. Government support is needed until the sector can stand on its own feet," he added.​

 

[Saif]

WB to give another $30m for power transmission

The World Bank (WB) will provide Bangladesh with an additional $30 million to help the country build up its power transmission network in eastern regions.

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WB to give another $30m for power transmission

The World Bank (WB) will provide Bangladesh with an additional $30 million to help the country build up its power transmission network in eastern regions.

The funds will be used for an ongoing project that aims to enhance and strengthen power transmission in greater Cumilla, Chattogram and Noakhali, according to the Economic Relations Division (ERD).

ERD Secretary Md Shahriar Kader Siddiky and WB Acting Country Director Gayle Martin yesterday signed an agreement to this end, said a press release from the finance ministry division tasked with boosting domestic socioeconomic development.

Power Grid Bangladesh PLC is implementing the project aiming to ensure a reliable supply and meet the growing demand for electricity in Cumilla, Chattogram and Noakhali, it added.

The initial financing agreement for this project, amounting to $450.64 million, was signed on April 10, 2018, under the Scale Up Facility of the WB.

However, $50 million was subtracted from the total funds and repurposed for initiatives aimed at combatting the fallouts of Covid-19.

Now, Bangladesh needs another $30 million from the multilateral lender to successfully complete its efforts to improve power delivery in eastern regions, the ERD said.

With a grace period of five years, the country was given a repayment period of 30 years for the loan.

The loan's annual interest rate has been set at 1.25 percent while its service charge is 0.75 percent and maximum commitment charge is 0.5 percent.

However, the World Bank has decided to waive the commitment charge this year, it added.​