Bonikbarta Exclusive

The interim government has announced that all completed projects and agreements in the electricity and energy sector during the tenure of outgoing Prime Minister Sheikh Hasina will remain in effect. At the same time, ongoing and under-review projects have been temporarily suspended. However, sector experts say that implementing these projects has increased consumer burden and disrupted government revenue. Keeping electricity prices at a manageable level will be impossible without amending the agreements of current projects.

Since 2010, the AL government has raised electricity prices in 14 phases under special laws to increase capacity in the electricity sector. This has led to a significant increase in consumer prices, with prices for consumers rising by 188 percent. Despite this, from the 2008-09 fiscal year to 2023-24, the Bangladesh Power Development Board (BPDB) has incurred a loss of over BDT 70.5 billion from electricity sales. Additionally, the organization has received BDT 130 billion in subsidies from the government treasury.

The outgoing Awami League government was compelled to issue special bonds to settle the debts of the electricity supply companies. Over nearly a decade and a half, buyers in the electricity and energy sector have fallen into massive financial debt, with many companies going bankrupt. In this context, the Ministry of Power, Energy, and Mineral Resources has announced that all projects and agreements implemented under special laws will continue. However, activities under these laws will be temporarily suspended.

In a press release on Sunday, the Ministry of Power, Energy, and Mineral Resources announced that all types of negotiations, project assessments, processing, and procurement planning activities under the Electricity and Energy Rapid Supply Enhancement (Special) Act, 2010 (amended 2021) will be temporarily halted. However, all activities under agreements already executed under this law will continue. Further decisions will be taken after informing the Advisory Council.

Various decisions in the electricity and energy sectors during Sheikh Hasina's tenure led to substantial financial debt in the country's energy sector. By the end of the outgoing government's term, arrears of nearly BDT 50 billion in the electricity sector and over BDT 14 billion in the energy sector had accumulated. These debts have arisen from the government's unethical benefits and unreasonable decisions. Experts suggest that to revitalize the electricity sector, the agreements made during the AL administration should be reviewed.

BD Rahmatullah, former Director General of the Power Cell, told Bonik Barta, "The unnecessary agreements made in the electricity and energy sectors can be reviewed. A review committee could be formed for this purpose, and the Ministry of Law could be involved in obtaining their opinions. There is an opportunity to review these agreements in the interest of the state's needs."

Muhammad Fauzul Kabir Khan, Advisor on Power, Energy, and Mineral Resources, briefed journalists at the Secretariat on Sunday. He stated that agreements made under special provisions will be reviewed. However, the activities of ongoing projects under this law will be halted.

After a meeting, Muhammad Fauzul Kabir Khan told journalists, "All activities under special provisions will be halted. Agreements that have already been made will be reviewed, and decisions will be taken accordingly. Since the agreements have been finalized, they cannot be canceled outright; therefore, legal aspects need to be examined."

Regarding the cancellation of the special law, the advisor said, "We need to discuss this with the Advisory Council. Decisions will be made based on the overall situation. However, whatever decision is taken, it will reflect the expectations of the people."

From 2009 to 2024, 91 new power plants were approved in the electricity sector alone under special laws. Out of the 154 power plants in the country, nearly two-thirds were established under this law. Notably, rental and quick rental power plants in the electricity sector were built under this law between 2010 and 2011. During the Awami League government's tenure, various business groups extended the duration of these plants from the original two and five years to 10 to 15 years. It is alleged that these costly power plants were operated more for business advantages than for electricity production. Subsequently, many businesses made substantial profits by constructing oil and gas-based power plants. According to former State Minister for Power, Energy, and Mineral Resources Nasrul Hamid, capacity payments of BDT 105 billion were made in the electricity sector over the past 15 years. Among these, ten companies received the highest capacity charges, including Summit Group, United Group, Bangla Cat, RPCAL, KPCAL, and Mohammadi Group. These companies received at least BDT 44 billion more in capacity payments.

During the Awami League government's 15-year tenure, four gas-based power plants were constructed, with a total capacity of at least 2700 megawatts. Despite uncertainties regarding gas supply, these power plants were approved between 2018 and 2020. It is alleged that many of these plants were approved through commissions and political influence. Although these power plants were built with significant investment, the gas supply is still uncertain. If these plants cannot be supplied with gas in the future, BPDB will have to pay a substantial amount in capacity payments for keeping them idle.

According to sources from the Power Division, three power plants with a total capacity of about 1,900 megawatts in Meghnaghat, Narayanganj, are waiting for entire gas supply. Among these, Reliance Power, an Indian company, has built a 718-megawatt plant; Summit Group, a private entity, has constructed a plant with a production capacity of 583 megawatts; and Unique Group has developed another plant with a capacity of 584 megawatts in the same area. The Reliance plant operates as a simple cycle, while the other two are combined cycle (oil and gas-fired) power plants. Additionally, there is an 800-megawatt gas-based power plant in Rupsha, Khulna. Under major gas agreements this year, the outgoing government had planned to supply gas to these power plants by 2026.

To increase the country's electricity generation capacity, five power plants with a total capacity of at least 5500 megawatts, including ultra-supercritical technology, are currently operational. Despite being commissioned under agreements made between 2009 and 2017, these plants have not been able to produce electricity continuously. Mechanical failures, financial shortages, and coal supply issues have led to interruptions. It is estimated that at least BDT 35 billion could have been saved with these plants. These power plants were constructed with substantial loans from various countries. They include the 1,320-megawatt plant in Rampal, Bagerhat; 1320 megawatts in Payra; 1320 megawatts in Banshkhali, Chattogram; 1200 megawatts in Maheshkhali, Cox's Bazar; and a 307-megawatt plant in Barishal.

In light of the country's projected electricity demand, BPDB has not been able to make effective use of these power plants, which were constructed with significant investment. Instead, due to having more capacity than demand, a detailed analysis is needed for the proper utilization of these plants. Experts suggest that such analysis could help reduce costs and expenses in the electricity sector.

Shafiqul Alam, Lead Analyst for the Energy Sector at the Institute for Energy Economics and Financial Analysis (IEEFA), told Bonik Barta, "The power plants should be analyzed and utilized in a way that keeps capacity payments to a minimum. The contracts for oil-based power plants could be re-evaluated to reduce costs. Considering the overall economic situation of the country, it is important to assess whether there is an opportunity to review the contracts of other costly power plants."

In addition to fossil fuel-based power plants, the government has approved the construction of a large number of solar power plants in the country. Dozens of these power plants have been built over the past two years. Under special laws, these plants were approved without any competition. The power purchase agreements for these plants have been set at least three times higher than those in neighboring India. The price per unit for the solar power plants currently approved in Bangladesh is not less than BDT 11 to 12.

The largest solar power plant approved in the country to date is Tista Solar Limited. It was constructed by Beximco Power Limited, a subsidiary of Beximco Group, which is associated with Salman F Rahman, former advisor on private industry and investment to former Prime Minister Sheikh Hasina. The plant's electricity has been fed into the national grid since December. The plant was built on 650 acres of unused char land in Sundarganj Upazila, Gaibandha, in 2017.

To address the gas shortage in the energy sector, the outgoing Awami League government signed several LNG import and infrastructure agreements. Summit Group was awarded the contract to build the country's third LNG terminal in a Cabinet Committee on Economic Affairs meeting last June. Although the 500 MMCFD capacity terminal has not yet started construction, the Awami League government also signed a long-term LNG supply agreement with the American company Excelerate. Additionally, 48 wells are being drilled for gas exploration under special provisions. However, there are allegations that Chinese and Russian companies are being paid two to three times more than the local company BAPEX for these projects.

Energy expert and BUET Professor M Tamim told Bonik Barta, "It is a positive step to suspend ongoing projects under the special law. However, the work done under this law should now be examined for its rationale. This way, the public can determine whether these projects have financial success in the electricity sector. If not, a proper decision needs to be made regarding them."