Huge dues in power-energy sector due to dollar, taka crisis

Electric pylonsBSS file photo

The power and energy sector has been struggling with a huge debt load.

It is failing to settle the electricity bills with the private power plants on one hand while it is being compelled to keep up with the dues of foreign companies due to the ongoing dollar crisis on the other hand.

According to the concerned organisations, the Power Development Board (PDB) owes Tk 250 billion to the private power plants which are in production.

PDB owes Tk 80 billion as gas bill to Bangladesh Oil, Gas and Mineral Corporation (Petrobangla).

The organisation owes about USD 500 million dollars (about Tk 55 billion) to Adani of India.

Fuel oil importing organisation Bangladesh Petroleum Corporation (BPC) owes USD 270 million dollars (nearly Tk 30 billion) to foreign suppliers.

Gas extracting US company Chevron will get USD 200 million dollars (Tk 22 billion).

Besides, the power and energy sector has outstanding dues to some other sectors.

Experts said trust of energy suppliers will decrease if the outstanding dues keep increasing. They don't want to make long term agreements. They make delays in supplying fuel. As per agreement, a fine has to be given if the outstanding dues payment is delayed. The banks increase fees to open new LCs for import.

Meanwhile, the summer will begin in March. At the time, additional fuel will be required to run power plants. Import of gas, coal and fuel oil have to be increased. There is a fear whether additional fuel can be imported for power plants amid the crisis of dollars and taka. The power plants could not be run due to the energy crisis last year during the summer.

Speaking to Prothom Alo, power, energy and mineral resources affairs state minister Nasrul Hamid said there are some problems and efforts are on to solve those. Some dollars are being received and outstanding dues are being paid. Consulting with the finance division, the rest will be solved.
He said the government has taken steps to pay dues of the private plants through bonds. Dollars will be required to pay foreign debt.

Why outstanding

The government sells electricity less than the cost of production. The finance division of the finance ministry gives the remaining amount as subsidy. As adequate revenue is not being collected, the finance division is not able to provide in time.

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The experts said the amount of subsidy has increased as the capacity charge has to be paid keeping the power plants idle. The finance division is discontent over the matter. The capacity charge stands at Tk 260 billion for the public and private power plants in the fiscal 2022-23.

The banks are unable to provide dollars to pay dues of the foreign companies in the power and energy sector. Bangladesh had a reserve of over USD 48 billion, which has decreased to USD 25 billion. According to the International Monetary Fund (IMF) formula, the reserve stands at USD 20 billion.

The experts blame the dependency on imports for the crisis in the power and energy sector.

They observed the government has followed the path of import instead of emphasizing gas extraction.

There are public and private sector power plants in the country. PDB purchases all electricity.

According to the last estimation of the organisation in December, they owe Tk about 250 billion to the private power plants. These dues have been amalgamated as the finance division is not providing money as subsidies.

After failing to provide subsidy money, the finance division is now releasing bonds (financial commodities like savings certificates), the dues in the power and fertilizer will be paid with the money. Meanwhile, a bond worth Tk 20 billion has been released to pay the dues of the power plants.

Private power plants owners association Bangladesh Independent Power Producers Association former president Imran Karim, speaking to Prothom Alo, said the work of the bond is going slowly. Out of Tk 120 billion, only Tk 20 billion of bonds has been given. The rest should be given expeditiously. Despite this, half of the dues will remain.

He said the summer may prolong this year. If the dues are not paid, the operation of the power plant will be difficult.

In the beginning of the year, PDB discloses the necessary requirement of dollars for importing coal and fuel oil for the power plants. Till last December of the financial year 2023-24, their requirement was USD 3.73 billion dollars for six months. The officials estimated that the requirement will be higher in the next six months. However, the PDB is not getting required dollars. As a result, the organisation is not able to regularly pay the price for the imported electricity.

A total of 1160 MW electricity is being imported from India. Adani's power plant established in Gedda of Jharkhand had been added to it in March. Power division sources said the dues of Adani's power plant stands at USD 500 million and the amount is increasing. However, Adani has kept supplying the electricity as per the requirement.

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However, Rampal and Payra Power Plant (a unit) were suspended for sometime in several phases as coal could not be imported.

The capacity of electricity generation in the country is 26,000 MW. But in times of necessity, the required amount of electricity cannot be generated.

The highest amount of electricity, 15,648 MW, was generated on 19 April last year. Later, the highest 14,000 MW electricity has been generated till now. 25 per cent of electricity generation capacity on average has been kept shut due to the crisis of energy during the summer.

Meanwhile, the BPC is making profit by selling fuel oil for one and half years. However, the corporation is not getting dollars to pay the bills of imported oil for two years. As a result, the foreign supplier companies are mounting pressure to pay the bills. As an alternative, the BPC made a proposal for transaction in yuan with China and repee with India in May last year. But the matter is not finalised.

BPC sources said around 17 to 18 LCs have to open to import 5,00,000 tonnes of fuel oil and 100,000 tonnes of crude oil every month. But the banks delayed due to the dollar crisis. Some 25 to 30 days require the value of an LC.

According to BPC, outstanding dues of foreign companies stood at USD 270 million till Thursday last.

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Officials said around USD 20 million is released at times from Bangladesh Bank. However, total dues cannot be paid with that.

Foreign companies are alerting that they will not supply fuel oil if their dues are not paid.

Chevron extracts gas and sells it to the government. The government pays them in dollars. Of the produced gas, Chevron provides 55 per cent. The government has to pay USD 50 million dollars every month.

Energy division sources said bills are being paid to Chevron for several months. However, the previous dues remain. The amount is over USD 20 million.

Petrobangla sources said PDB owes over Tk 80 billion to them, Tk 20 billion to the government fertilizer factories. But that money could not be realised despite making repeated urges.

During the dollar crisis in July 2022, the government impolt liquified petroleum gas from the open market. As the gas crisis started at that time, the businessmen agreed to pay an additional price, but they wanted uninterrupted gas supply. The government raised the gas price by 80 per cent. But the gas crisis remains.

'Crisis cannot be solved by raising prices'

Experts said the dependence on import in the power and energy sector, additional capacity than the necessity and the huge capacity charge are mounting pressure on the economy.

They said foreign currency worth USD 12 billion is required for the energy sector. It is difficult to manage such a huge amount of dollars.

Private research organisation Centre for Policy Dialogue (CPD) senior research director Khandaker Golam Moazzem said the financial condition in the power and energy sector is in bad shape. PDB is becoming a white elephant for paying capacity charges for private power plants.

He said the government may save financially by raising the price of power and energy, but the crisis will not be solved.

*This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.