Cautious policy on rental power

As 16 fuel based rental power projects are putting heavy pressure on the economy through huge petroleum imports, the government is now discouraging further rental power plants, a power division official said.
The cabinet committee on purchase last month sent back two proposals to the power division for installation of quick rental power plants at Satkhira and Bhairab, said the power division high official, wishing anonymity.
The committee asked the division to place the proposals again with statistics on existing plants based on a detailed study.
It also told the division to mention the sources of funding and energy for the proposed plants. The committee said the plants should not be dependent on a single source of energy for generating power, as it may prove problematic in the future.
It said there should be arrangements for producing power from liquefied natural gas, coal, and fuel, apart from gas.
These 16 rental power plants with a capacity of 1,400 megawatt went into production between August 2010 and May 2011. All of them run on furnace oil and diesel, said the official.
Besides, a process is underway to install independent and public-sector power plants. These plants, mostly fuel-based, will add more than 1500 MW electricity to the national grid.
The government will have to import about 70 lakh tonnes of fuel because of these plants in the current fiscal year against a usual import of 30 to 35 lakh tonnes.
Huge import of fuel is creating a chain reaction on different areas of the economy like the GDP, inflation and exchange rate, said finance ministry officials.
Taka is getting weaker against the US dollar for increasing demand for foreign currency for fuel import, which, in turn, is contributing to inflation.
The government has to borrow from the central bank to pay subsidies on fuel and power that are also pushing up inflation, said central bank officials.
According to the power division proposals, the government will have to purchase power from Satkhira and Bhairab plants at higher rates that will further increase government expenditures.
The division set power price at Tk 9.15 a kilowatt for Satkhira plant and Tk 8.88 a kilowatt for Bhairab plant. The government now buys electricity from existing furnace oil-based plants at Tk 6.94 to Tk 6.96 a kilowatt.
The proposals say the government will have to make the purchase in foreign currency with an exchange rate of one US dollar against Tk 70.
But the exchange rate has already crossed Tk 80 against the dollar due to depreciation of taka. It means the government will have to spend more for purchasing power from the two plants.