8 rental power plants given go-ahead

Chief Adviser Fakhruddin Ahmed has approved the installation of eight rental power plants, with a total capacity of 300 MW, with the government subsidising the Power Development Board (PDB) to purchase power from the plants during the three years of the costly scheme.
The chief adviser approved the power ministry proposal on Thursday when he also gave his assent to form a secretary-level committee headed by the finance adviser for fixing taxes and duties on the rental power developers who are expected to start producing power from April next year.
The rental power plants will provide respite to consumers for a period of three years by which time the government expects to complete some of the major large-scale power projects aiming to solve the power crisis permanently.
Since rental power is typically costly and to be able to subsidise PDB, the power ministry has requested the World Bank to provide a Power Sector Development Policy Loan of 100 million dollars. The loan will also be spent for other development work in the power sector.
A World Bank mission during its visit to Dhaka between September 10 and 19 signed a draft aide-memoire on the loan. The draft memoire demands that the National Board of Revenue (NBR) fix an all-inclusive tax on the rental power payment to be made by the PDB. Such tax would simplify tax issues regarding rental power projects -- which will be installed in the country for the first time.
The power ministry suggested that six of these plants would use natural gas for power generation and two would use liquid fuel. Gas-fired plants will be installed in Fenchuganj (50 MW), Kumargaon (50 MW), Shahjibazar (50 MW), Ashuganj (50 MW), Bogra (20 MW) and Bhola (20 to 30 MW). The petroleum-fired plants would be set up in Bheramara (20 MW) and Khulna (40 MW).
The aide-memoire also asked the government to ensure gas supplies and other related infrastructure at the selected places.
"We have made some improvement in power supply through maintenance work at the existing plants. But there is no reason to feel comfortable about it. Demands are sharply rising and if any plant goes down, there could be a major shortfall," said a top power ministry source.
The power ministry's proposal to the chief adviser states that the government has taken the initiative to set up new power plants to ensure future power supplies. But it will take between 18 months to 36 months to attain the results from the new projects. To increase power supply to some extent by next summer, the ministry took initiatives to buy power from captive power plants, extra power from large private power plants and expedite small power projects. These measure, however, were not successful. This is why the ministry took up a scheme on rental power plants.
The ministry completed necessary homework in this regard and on September 10, at a meeting chaired by the adviser, the power ministry selected eight places where the rental power plants will be set up.
As part of this scheme, the NBR has already exempted taxes over 10 percent on rental power plants. But the ministry feels that since rental power plants will consist of old and used machinery, it would be difficult for the NBR to fix the price of the plants and thus a tax complication would be created. In contrast, the private power projects under the Private Sector Power Generation Policy get tax exemptions.
Meanwhile, the Power Cell of the power ministry has finalised the Request for Proposal (RFP) for rental power plants.
In mid-September, the Cell prepared a list of 17 power companies including six or seven local companies -- which expressed their interest to participate in the bid, said sources adding, the number of such companies has already increased.
The government has been trying to sign rental power contracts for the last three years without any positive result.
Even though rental power schemes require each bidder to have its own power generator, the past government had tried to award dozens of rental power schemes to party-men with 15-year tender term despite their inexperience in the sector.
Rental power projects are popular around the world for a maximum period of three years as a makeshift measure to handle sharp rise in demand for power.