Pvt power cos allowed to import fuel oils

The Cabinet Economic Affairs Committee Wednesday approved a Power and Energy Ministry's proposal to allow private power companies, particularly the rental and quick plant operators, to import petroleum products on their own to run their plants, reports UNB.

The committee, with Finance Minister AMA Muhith in the Chair, also approved some other proposals including cancellation of appointment of Canadian firm Visual Defence Incorporation (VDI) for security-charge of Shah Jalal International Airport on allegation of forgery, de-liquidation of five jute mills and appointment of consultant for feasibility study to set up a third sea port at southern region of the country under public private partnership (PPP).

In the fuel import proposal, the Power Division mentioned that the private power plant operators should be allowed to import fuel because of the inability of the Bangladesh Petroleum Corporation (BPC) to supply required petroleum fuel for them.

At present, BPC is the only eligible authority to import and supply petroleum fuel across the country.

The Power Division said about 500 tonnes of furnace oil is required in 24 hours for generating 100 MW electricity in rental power plants. But it's not possible for BPC to supply such huge quantity of fuel.

The proposal outlined 9.0 per cent service charge to be paid to the private power companies for their import of petroleum oils under their own arrangement. This charge will be reviewed after one year.

Under the existing contract, the government is responsible for supply of fuel to the private power plants.

Experts in business circle, however, believe this new arrangement may create scope for brisk business for some power plant companies.

Source: thefinancialexpress-bd.com

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Under-construction Sirajganj power plant to be upgraded

The government has decided to upgrade the under-construction Sirajganj 150-megawatt (mw) power plant to 225mw combined-cycle station investing Tk6.79 billion more funds, officials said Wednesday.

Power Division officials said they would install a 75mw-capacity combined cycle unit with the under-construction 150mw gas-based power station in Sirajganj.

"Since the extra 75mw unit will not consume additional fuel and will be run by the produced steam from the under-construction 150mw plant, we have decided to install the combined cycle plant," a senior official of the Power Division said.

The state-owned North West Power Generation Company Ltd (NWPGCL) has already sought approval of the Planning Commission for the 75mw additional unit at a cost of Tk6.79 billion.

The company has sought Tk6.77 billion fund from the public exchequer while it will provide Tk13.89 million from its own resources for installing the unit.

The state-owned power generation company is now constructing the 150mw Sirajganj power plant at a cost of Tk9.62 billion in northern Bangladesh. The plant is scheduled to be completed by June this year.

The Asian Development Bank has confirmed its loan for the Sirajganj plant in June 2007. The ADB will provide Tk3.80 billion for constructing the Sirajganj plant.

The Power Division official said it would now require a total of Tk 16.41 billion for upgrading the 150mw under-construction power station to 225mw capacity combined cycle plant at Sirajganj.

Since the demand for electricity in the country's northern region is growing day by day, the planned 225mw power station at Sirajganj will give a big boost to the ailing power supply situation in the impoverished northern region, he added.

A Chinese firm, CMC, is working to set up the 150mw Sirajganj power plant.

"For the additional 75mw combine cycle power unit, we will float a fresh tender for appointing contractor to install the unit with the under-construction gas-turbine 150mw station which is expected to be completed within this calendar year", the Power Divisional official said.

According to project proposal, upgradation of the 150mw Sirajganj power station plant to a225mw one is planned to be completed by the next financial year (2012-13).

Source: thefinancialexpress-bd.com

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Austerity, further hike in fuel, power prices likely

The government may go for a drastic cut in its spending and hike in fuel price and power tariff in a bid to maintaining the country's macro-economic stability that, of late, has come under threat due to soaring subsidy costs.

The meeting of Council for the Co-ordination of Fiscal, Monetary and Exchange Rate Policies held Monday at the Ministry of Finance (MoF) with Finance Minister AMA Muhith in the chair reviewed the overall macro-economic situation and discussed possible ways of meeting the challenges.

The meeting decided to identify areas where spending could be reduced to help lessen the pressure on the budgetary resources, a secretary who attended the meeting, said.

The process of locating possible candidates for spending cut will be completed by the end of next month. The Coordination Council will meet again to decide finally on readjustment of government spending, he added.

"The government's fiscal management faces problems due to high spending on subsidies. Since it is difficult to cut subsidy costs, the government is left with no options other than trimming its revenue expenditures or increasing fuel price and power tariff," the senior government official told the FE on Monday.

Bangladesh Bank (BB) Governor, Chairman of National Board of Revenue (NBR), secretaries of finance division, banking and financial institutions division, economic relations division (ERD) under the MoF, and secretaries of commerce and planning ministries also attended the meeting.

The meeting analysed all major economic indicators of the current fiscal year. According to the latest data, placed in the meeting, the bank borrowing of the government as of October 19 was Tk 95.75 billion. Of the total amount, Tk 60.75 billion was borrowed from BB, while the rest from the scheduled banks. The bank borrowing target set in the national budget for the current (2011-2012) fiscal was Tk 189.57 billion.

"The situation with the government's bank borrowing during the first 109 days of the current fiscal year is really serious one. If the trend continues, the total bank borrowing might be more than twice the target set for the current fiscal," a BB high official told the FE.

The meeting was told that the amount of subsidy for the current fiscal, originally estimated at Tk 224.70 billion, could rise up to Tk 410 billion if price adjustments are not made soon. In the last fiscal, subsidy was originally estimated at Tk 142.63 billion. But it went up to Tk 193.99 billion in the revised budget, according to the finance ministry's budget documents.

The meeting noted with concern that foreign aid disbursement recorded a decline in the first quarter of the current fiscal as the country received funds worth US$ 246 million, $70 million less than the same period of last fiscal.

However, export and revenue earnings marked 22 per cent and 15 per cent increase respectively during the first quarter of the current fiscal year.

"We had 15 per cent revenue earning growth during July-September period compared to that of the corresponding period of the previous fiscal," Nasir Uddin, Chairman, NBR, who attended the meeting, told the FE.

He said he was hopeful of achieving revenue target set for the current fiscal year.

The meeting was unanimous on the issue of reducing the bank borrowing by the government with a view to reining in the inflationary pressure on the economy. Inflation soared to 11.97 per cent in last September which was the highest in the last decade.

Another high official felt that the government would face difficulties to cut both revenue spending and subsidies.

Measures such as cutting the number of foreign trips by government officials and suspending purchase of new vehicles for government officials and for project offices would make little difference.

He, however, said the government has no option other than increasing the prices of fuel and power tariff to tackle the situation.

Source: thefinancialexpress-bd.com

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Rental power plants -- more than a zero-sum game

Shamsul Huq Zahid

In Bangla, there is a saying 'garaj baro balai' (necessity knows no law). The ongoing power crisis of unmanageable proportion has again proved it to be right, at least, in the case of the government's hasty actions concerning the liquid fuel-guzzling rental power plants.

The move to facilitate early commissioning of a good number of rental and 'quick' rental power plants in the private sector with the objective of meeting a large power deficit has given rise to lots of troubles, financial and otherwise, that the government, possibly, failed to foresee in their true perspective.

The power shortage has been taking a heavy toll on the economy. And the short-term and handy means chosen to offset, at least, partially that loss, in turn, are making budgetary management on the part of the government rather difficult.

The rental power plants together have already emerged as a serious pain in the government's neck. For running those plants, it is left with no option other than spending a substantial amount from its reserve, which has again come under strain of late because of less-than- expected inflow of foreign assistance and remittance income, on the import of additional quantity of diesel and furnace oil.

The foreign exchange expenditure apart, what should worry the government more is the subsidy that it would have to provide on account of the supply of fuel to the rental power plants and the gross mismatch between power procurement and selling tariffs.

There are confusions about the subsidy estimates since varying disclosures are made from to time by men in-charge of the ministry and agencies concerned. However, according to the latest estimates, if selling tariffs remains unchanged both in the case of petroleum products and power, the government would have to provide subsidies worth Tk. 230 billion -- Tk. 140 billion on oil marketing by the Bangladesh Petroleum Corporation (BPC) and Tk. 90 billion on power purchase, mainly from rental power plants, by the Power Development Board (PDB) in the current fiscal.

If the 'subsidy' estimates are right, the government will be in a real soup in meeting those, particularly when the allocation against all types of subsidies in the national budget for this fiscal is little over Tk. 90 billion. In such a situation, the government will take recourse to what most governments do; it would borrow from banks in excess of the amount projected in the budget, thus, adding more fuel to an already high inflationary pressure (point-to-point inflation, according to the Bangladesh Bureau of Statistics, was 12 per cent in last September).

There are also other concerns. A good number of rental power plants, according to a recent report in a Bengali daily, are unlikely to be commissioned on schedule because of the fuel supply-related problems. The failure on the part of the Bangladesh Railway and the Bangladesh Inland Water Transport Authority to develop necessary infrastructures to carry fuel to at least seven rental and quick rental power plants has made the commissioning of these power plants, having 450 megawatt (MW) generation capacity, uncertain. Poor navigability, low clearance of bridges over some rivers and insufficient rail track and tank wagons are responsible for the delay in fuel supply.

But the government may have to count a cost if these power plants fail to start producing power according to their pre-set schedules. And the conditions set in power purchase agreements that the PDB signed with rental power plants would come into play. Since the government wanted expeditious execution of rental power plants, it included a provision of imposing fines for delayed implementation of rental power plants. The provision is applicable to both the power plants and the government, depending on the nature of the causes.

The pertinent question that one may like to ask: Instead of going for rental power plant what else the government could do to narrow the power deficit within the shortest possible time?

There is no denying that rental plants are quick-fixes yet expensive solutions to power problem. But what is the use of opting for a solution that cannot deliver results in time for problems that the decision-makers fail to see beforehand? It is expected that the authorities concerned while allowing installation of a power plant at any specific site would take all relevant issues, including the facility available for transportation of fuel to it, into cognizance.

More importantly, no matter what the government is claiming about generation of additional power during its nearly three-year rule, the fact remains that people are still troubled by frequent load-shedding. The government may have added 1000-1200 MW or more to the national grid since its coming to power but, in the real sense, it has been more of a zero-sum game since the total generation by public sector power plants, in the meanwhile, has declined due to gas supply shortage or technical glitches.

zahidmar10@gmail.com

Source: thefinancialexpress-bd.com

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