Photo: Collected
As the power sector faces a fund crisis related to fuel imports, it is required to address its pending dues, a significant portion of which will be covered as capacity charges.
On July 18, the Finance Division sent a letter to the Energy Division in support of the Power Development Board (PDB), requesting Tk 1,000 crore. The letter noted that dues for Independent Power Producers (IPPs), rental, and quick rental power plants have been settled up to June 2023 through power sector subsidies.
For the subsequent two months, claims amounting to Tk 5,426 crore have been made. Of this, Tk 1,808 crore has already been disbursed through bonds and subsidies.
The Ministry of Finance has added some conditions regarding the use of the money. It has said that this money cannot be spent for any purpose other than paying the dues of IPP, rental and quick rental power plants. This amount has to be reconciled with the total amount due as determined through future audits.
Officials of the Finance Division say that till June 30, the arrears due to subsidies will be at least Tk 30,000 crore. In the current financial year 2024-25, the subsidy will be paid from Tk 40 thousand crore allocated in the budget, most of which will go towards capacity charges.
Among them, Summit Group has charged the highest capacity amount. The company has received around Tk 17, 610 crores as rent for nine power plants. US-based Agrico International received a capacity charge of Tk 8,310 crore for seven centers. United Group has taken capacity charge of Tk 7,758 crore against six plants.
Consumers Association Bangladesh (CAB) Advisor Professor M Shamsul Alam told the Daily Messenger “These plants will increase the pressure of capacity payment till ends of tenure. To meet the cost, the government will increase the price of electricity.”
He added, power plants sit idle with 45 percent of capacity throughout the year and 18 plants with 4,842 MW in the pipeline, will have to pull charges until 2050, putting an additional burden on the public shoulders. The economy is now under pressure to pay for these plants of the government.
Necessary initiatives should be taken to rationally reduce the amount of capacity charges in the power sector. For the sake of fair subsidy management, measures should be taken to implement real time data-based ERP software in PDB, subordinate organizations and power generation units.
At the same time, in the interest of financial order and national budget management, according to the financial empowerment order, matters related to financial integration, such as power plant contract renewal or setting up of new power plants should be sent to the finance department for consideration.
Renowned energy expert M Tamim said “We have to stablish good governance in the power sector and follow the conventional laws scrubbing bypass special laws.”
Officials of the Ministry of Finance said that since it was difficult to pay the subsidy in cash, the initiative was taken to pay the liability through special bonds. As part of this, special bonds of about Tk 15,000 crore have been issued against bank loans of private sector entrepreneurs till June 30. At the same time, about Tk 10,000 crore have been disbursed from the budget for subsidy.
Whether power plants produce electricity or not, a fixed fee is set based on their generating capacity, known as capacity charge. According to a study by research firm CPD, the capacity payment in the financial year 2022-23 was Tk 28,000 crore, which was Tk 5,600 crore in the 2017-18 financial year.
According to Energy Division, capacity charges during the three terms of the current government till June 30, 73 IPPs (Independent Power Producers) and 30 rental power plants have been given about Tk 1,05,000 crore.
Messenger/Fameema
