Who gains, who loses? | The Daily Star
12:00 AM, June 11, 2013 / LAST MODIFIED: 10:16 PM, June 10, 2013

Rampal Coal-Fired Power Plant

Who gains, who loses?

WHO does not know that Bangladesh needs more electricity for its economy to grow? Who does not know that every economic opportunity comes with an environmental cost, be it high or low, visible or less visible? But does this knowledge really leave us with no choice when Bangladesh signs three agreements with India to establish a 1320 megawatt coal- fired power plant in Rampal?


Without answering the question "who pays the cost of environmental degradation and who are the ultimate beneficiaries from building the power plant?" we cannot justify building Rampal power plant.

First, setting up Rampal power plant is not going to ensure our energy security; rather it may aggravate our existing problems. The newly formed joint venture company named Bangladesh India Friendship Power Company (BIFPC), with equal ownership of Bangladesh's BPDB and India's NTPC, will be a full-fledged commercial venture. A commercial venture with an objective of cost recovery and profit maximization is not a problem that may lead to project failure. Rather, the problem will be visible elsewhere. The source of finance and ownership will matter the most in this type of project's sustainability. Initially Bangladesh and India will equally share up to 30 percent equity of this mega project. The remaining equity, which may be equivalent to $ 1.2 billion, will be taken as bank loan with help from the NTPC. Repaying the loan will require quick cost recovery and hence will put an extra pressure on the company to reduce cost. If we consider the lifetime of the project the burden of loan repayment in the initial stage of the project will put additional pressure on the company even before it begins to earn economic profit.

It is agreed that India's NTPC would take the lead in management and operation of the power plant and it would be operated like an independent private power plant selling electricity to PDB. Suppose, India's NTPC manages the company efficiently, meaning that it produces the electricity at low cost and makes economic profit. Does that ensure that the consumers in Bangladesh get electricity at affordable price? Then who pays the high cost? Off course the consumers in Bangladesh. Now, the consequence of highly subsidizing privately operated quick rental power plants in Bangladesh becomes relevant again. Have we not learned enough from the escalating price of electricity? Have we not learned enough from seeing how our tax money is subsidizing the fuel-hungry giants like inefficient quick rentals?

Currently BPDB purchases electricity at Tk 3 per unit from coal-fired power plant. Having Rampal power plant in operation the per unit electricity cost might be Tk 8.85 if the coal costs $145 a ton. If the cost of coal is $105 per ton, the price would come down to Tk 5.90. If the price of electricity has to be reduced further, one of the ways is to import low quality coal with high sulfur content. Although, Environmental Impact Assessment Report (EIA) suggests use of high quality coal imported from Australia, Indonesia or South Africa, there is always a chance that for the sake of cost reduction, the management decides to use low quality coal in the absence of government regulation on private companies. This risk of using coal with high sulfur content is also evident from the EIA which states that: "provision has been kept for future installation of Flue Gas Desulfurization (FGD) plant to limit sulfur dioxide emission within the ECR 1997 standard in case of taking decision for importing higher Sulfur containing (e.g. >0.6%) coal."

Another risk of commercial power plant is that environmental management including pollution abatement measures usually does not get its due priority because of cost effectiveness of such measures. In case of Rampal coal-fired power plant a detail Environmental Management Plan (EMP) has been developed in order to minimize the negative impacts. The inbuilt environmental management plan include management plan for air quality control, noise management, waste management, coal stock yard management, coal transportation management, waste water management, hazard and risk management, health and safety management, water resources management, land and agriculture management, fisheries management, Dolphin conservation, ecosystem management etc. According to the feasibility report, the inbuilt abatement measurers will cost about BDT 12561 million. In addition, environmental management plan will be provided with the cost of about BDT 369.00 million in different phases of power plant. This does not immediately ensure that the environmental management plan will not suffer from a resource shortage in the project's lifetime. There remains a high chance that a commercial venture with its motive to maximize profit for repaying its loan will deprive environment for its own benefit.

Suppose the environmental management plan proposed in the EIA is implemented fully and efficiently. Does this ensure that the environment can be saved? There is a perception that having an environmental management plan signals that the government is aware of the environmental hazard and will take necessary measures to minimize the negative impact. It is evident from the EIA that even if the environmental management plan is implemented fully and efficiently, severe environmental damage to Sundarbans will be irreversible. This danger is also reflected in an independent EIA of physical, biological, social and economic environment of Sundarbans done by Dr. Abdullah Harun of Khulna University. His study shows that most of the impacts of coal fired power plant are negative and irreversible and cannot be mitigated in any way. According to that study climate, topography, land use pattern, air quality, water quality, wetlands, floral and faunal diversity, capture fisheries and tourism will be affected permanently. The coal fired power plant with its environmental management plan will not be able to stop increase in water logging conditions, river erosion, noise pollution and health hazards; decrease in ground water table; loss of culture fisheries, social forestry and major destruction of agriculture. So, if anybody comes up with the idea of compensation, this is where no compensation is good enough.

Rampal power plant will not only threaten the biodiversity of Sundarbans but will also leave the South Western coast of Bangladesh vulnerable to storm, cyclone, and other natural disasters. Thus losing Sundarbans and the biodiversity of it will create negative repercussion in the economy too. If ultimate objective of the government is to produce 2640 mw, the subsequent pollution will expedite the process of destroying Sundarbans.

The targeted production of 1320 mw electricity can be used for industry, agriculture, and residential use. It may lead to higher economic growth of the country, but at the expense of lost livelihood opportunities and economic growth of the Sundarbans region. Eventually if we want to see who is going to benefit from the economic growth, it is only those who can afford to pay for electricity. This means the whole nation will suffer the loss of Sundarbans while only few users and the businessmen will benefit from this choice. As a solution to this problem we must stop building Rampal power plant and look for other viable alternatives.

The writer is Assistant Professor of Economics, Department of Accounting and Information Systems, University of Dhaka

Stay updated on the go with The Daily Star News App. Click here to download it for your device.

Grameenphone and Robi:
Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News