Some plants earned $5.5b for unproduced power

Since the government had committed to paying private entrepreneurs even for unproduced power, the Power Development Board is now incurring huge losses, economists and sector analysists said yesterday.

Thanks to the model of a contract with PDB, some independent power producers (IPPs) pocketed around $5.5 billion in the name of capacity charge, without producing any electricity, in the last one decade, they said.

They were speaking at the Bapa-BEN (Bangladesh Paribesh Andolon and Bangladesh Environment Network) annual conference, held on the Siddheswari campus of Stamford University in the capital.

"It is a win-win situation for private entrepreneurs that whatever they invested, whatever they produced, they would be given a guaranteed market, and the prices had also been predetermined," eminent economist Rehman Sobhan told the conference.

"We appeared to have opted for private-public partnership. Herein appears to lie some of the problems we are actually facing in regard to the energy sector. Now the figure, which again I gathered from papers, indicate IPPs are now providing close to about 50 percent of energy generation. At the same time, the capacity utilisation of IPPs is not very high," he said.

"It created a huge problem for the economy. Because the way IPP is negotiated has given a guaranteed market [for them]. And the government will be the principal consumer of the product."

This model is crony capitalism as it has allowed a number of people to set up profitable ventures with no risk of loss, he added. "The nature of this model is that the private sector makes the profit and the public sector takes the risk."

This is exactly what appears to be happening in the energy sector where the demand failure in terms of planning forecast has devolved on the government, which is now compelled to buy energy from suppliers, he said.

Taking part in a session of the conference, Monowar Mostafa, country leader of European Climate Foundation, said the power sector has seen unprecedent progress but it hasn't come without a cost.

The government is providing power at a price less than the one at which it procures, forcing it to subsidise the sector. The subsidy is wasted when it goes to some vested quarters instead of benefitting people due to some wrong policies, he added.

If unrefined oil is imported for Tk 100 per litre, Tk 32 gets added to it the moment it enters the Bangladesh territory. Then comes the question of profit, commission and corruption. And all the pressure and burden are borne by the masses, he said, adding that the PDB suffered a loss to the tune of Tk 8,669 crore this year.

Last year, it was Tk 4,350 crore, almost twice as much as that in the previous year. To overcome the losses, the money funnelled into the sector also comes from the public.

"We have 148 power plants with the capacity to produce 22,000MW. As per last year's data, we purchased power from them for 153 days. They sat idle for 212 days. We have production way over the demand. A lot of words are in the air about whether the production is only on paper or not," he observed.

He also said some plants, which were supposed to be shut down five years ago, are kept on life support in the interest of a few companies.

"We no longer need quick rental. But they are still kept alive. We turned the power sector into a paralysed sector thanks to some wrong policies and massive corruption. A charge named capacity charge is being paid to the plants that have been sitting idle without production. This is actually a penalty on people," he said.

Referring to the losses, he said the penalty was Tk 13,000 crore last year just because the plants were made to sit idle. Not only this, state-owned power plants are made to sit idle. They have the other costs though they are not in operation. If it is included, around Tk 20,000 to 25,000 crore is spent on these idle plants every year, he estimated.

"On one hand, public money will flow into the sector through budget, on the other, people have to spend more directly from their pocket. These are the grim scenes from our energy sector. When companies are pocketing money without production, just based on a contract, it is called 'public money going to the private companies'", he said.

"We can name 10 to 12 such companies, which pocketed $5.5b."

Eminent economist Anu Mohammad said the cost of development projects where people's concern and opinion are ignored has been increasing in the absence of accountability.

Such projects result in environmental as well as financial disasters. The government looks for ways how to do the work (project) at highest possible cost, discarding the cost-effective ways, he said.