PDB needs Tk5,000cr subsidy to buy power from rental plants
The government will have to provide Tk 5,000 crore in subsidy to the power sector in the coming fiscal year to purchase electricity from the costly rental power plants.
However, the amount of subsidy will be less if the power tariff is increased, according to officials with the power ministry and other agencies in the power sector.
Of the amount, about Tk 3,000 crore will be required for purchasing electricity only from diesel-based rental power plants having total capacity of 450MW with per unit production cost of Tk 13-14. The remaining amount will be required for the furnace oil-based plants.
Under a government crash programme, agreements were signed for installing the rental power plants of 600MW.
Of the under-construction plants, two diesel-based rental plants of total 150MW are supposed to start operation in June-July while three diesel-based unsolicited quick rental plants of 300 MW are scheduled to come into operation in September.
Two more plants having 150 MW are expected to come on stream in December.
The plants, supposed to come into operation in next July, are 100MW Bheramara plant and 50MW Thakurgaon plant while the quick rental plants supposed to be installed are 100MW Ghorasal, 100MW Khulna and 100MW Siddhirganj.
Other two plants, which are expected to be installed in December, are Noapara 100MW and Barisal 50MW, furnace oil based.
The officials said the PDB had to incur a loss of Tk 900 crore in fiscal 2009-10 because of its sale of electricity at rates lower than the actual production cost.
So far, PDB has received only Tk 594 crore in two phases as loan from the finance ministry to make up for the loss.
The remaining Tk 300 crore for subsidy was managed from other heads. The finance ministry provided the amount of the subsidy from a World Bank credit that the donor agency provided under an agreement beyond the budgetary allocation.
Finance ministry officials, however, remained in the dark about the money required.
“We don't have any clear idea about how much money will be required by the power sector. But we assume, this amount might be double,” said a Finance Division official who deals with the matter.
Meanwhile, the Cabinet Purchase Committee, which approved the proposals for purchasing electricity from rental power plants, rejected an appeal of the power ministry for providing the required subsidy from the state exchequer.
Instead, the cabinet body asked the power ministry to settle the subsidy issue through negotiation with the finance ministry.
The government has already raised the allocation for the power sector to about Tk 4,975 crore from last year's revised allocation of Tk 2,600 crore.
But the allocation was made mainly for implementation and maintenance of power plant projects in the public sector, not for purchasing electricity from the private sector.
With purchasing electricity from these power plants at excessively high rates, the average power production cost will go up to more than Tk 4 and subsidy of Tk 1.6 will be required for each unit of power to sell to the public.
At present, the average selling rate is Tk 2.45 per unit while the production cost is Tk 2.80 - the average subsidy being Tk 0.35 per unit.
“As a result, the PDB will incur a loss of up to Tk 5,000 crore in its annual projected sale of 3,000 crore units in the coming fiscal year. This amount must come from the government exchequer to offset the loss. Otherwise, PDB cannot survive,” said an official.
Contacted, Power Secretary Abul Kalam Azad admitted the increase in the government's subsidy. He indicated that the amount of subsidy might be increased by 10-15 percent but said the full calculation has not been made yet.
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