Professor M Shamsul Alam is an energy expert, dean of the engineering faculty at Daffodil University and energy affairs advisor of the Consumers Association of Bangladesh (CAB). In an interview with Prothom Alo, he speaks about the reasons behind the energy crisis and who is to blame.
Despite all sorts of measures taken by this government to develop the energy sector, why has this crisis emerged?
This is a two-sided problem. On one hand, fuel is going out of the reach of consumers and on the other hand, the government's subsidy has increased. The crisis had cropped up from beforehand. We had protested against the rise in gas and electricity prices when the increase was proposed at the BERC (Bangladesh Energy Regulatory Commission) public hearing a few months ago. We said that in order to solve the problem, the government could carry out load-shedding on a limited scale. Estimating a 7 per cent growth, the targetted power generation for the current year was set at 84.16 billion (8416 crore) units. Even if generation falls by 0.5 per cent, there will be a big saving in liquid energy costs. We said, increasing the price of electricity and gas would be suicidal.
Do you think only the international situation is responsible for this?
The government is trying to say that this crisis has emerged due to the increased prices of oil and LNG in the international market. But we feel this has happened due to the erroneous policy of the government. The government intentionally did not make any effort to explore and extract anew the country's gas resources. At one time it was said the country is floating on gas. After 2016, the government's policymakers began saying there is no gas anymore. Both these statements are wrong. Over 60 per cent of our electricity comes from local sources. It the government takes decisions wisely, it won't be hard to bring the situation under control. Unfortunately, the government is looking at the matter from a revenue deficit angle. They are not thinking about the consumers' interests.
Other than increasing prices, what alternative would you suggest?
The development taking place in the energy sector at present is imbalanced and unequal. We said the development must be sustainable. Sustainable development benefits both the consumers and the producers. The state-owned organisations increased prices as they wished. At the same time, the organisations were told they had to make a specific percentage of profit. So, taking that profit into account, the prices of the products were increased. The consumers lost on both accounts. In 2010, the private sector was given the opportunity for power generation in the name of rental and quick rental, but without any open competition. A particular quarter was given this opportunity. The law in this regard was first made for two years, then extended to five years. Now it is being said that this law is required for renewable energy. The earning and expenditure projected by Bangladesh Petroleum Corporation (BPC) hardly seems plausible to us. We demanded that this be audited by an international audit firm or the office of the Comptroller and Auditor General (CAG).
Let me give an example of the kind of irregularities and corruption that takes place in the energy sector. An NOC has to be obtained from Bangladesh Bank to import LNG. The importer has to fulfill certain conditions for this. All the papers must be submitted in keeping with the quantity of products being imported. But the concerned company only submitted 50 per cent. When Bangladesh asked for an explanation, the company said they had spent 50 per cent in the service sector. But there is no scope to spend the LC money in the service sector.
If the government ignores your recommendations and raises the price of gas and electricity once again, what impact will this have on public life?
We wrote to the government saying that the growth of electricity generation was estimated at 7 per cent. In the meantime, over 10 per cent of load shedding is being carried out. So, even the previous price which was estimated is too much. Let there be a public hearing to reduce this. The energy and mineral resources division has been illegitimately increasing the price of fuel oil year after, in violation of the BERC law. If the price of gas and electricity is increased yet again, people's purchasing power will drop even lower. The deficit in the energy sector which the government is showing, is much higher than the actual deficit. This can be proven in a public hearing.
You all have called for BERC's authority to be increased. But BERC runs on the government's directives. What difference will it make to the consumer if its authority is increased or decreased?
BERC has authority but lacks the capacity to exert its authority. We want them to exert their authority. For example, the owners would increase the price of LPG at will. We went to court and said they cannot do this. It is BERC that, in accordance to the law, can increase the price and that too, by means of public hearing. And yet now that is being done. They cannot increase prices at will.
You talk about system loss and pilferage in the energy sector. Do you have specific information on this?
Yes, we do. Our calculations indicate that 40 per cent of the gas being supplied to houses in Dhaka, is being pilfered. Then there is wastage too. Prepaid meters were installed to control this pilferage and waste, but the meters still haven't been installed in 80 per cent of the houses. The distribution company supplies the meters, taking 25 dollars for a 10 dollar meter. And Tk 100 is charged along with the monthly bill. Is this not an irregularity and theft?
How to emerge from this situation? You will continue to complain and the government will continue doing what it wants.
There is a way out. The government must not view everything from a business angle. The people who run these companies are government employees. Why will they get a percentage of the profits? The expenditure and income of these companies are inflated. If a higher expenditure is shown, tax and VAT is increased. And the officials pocket a large sum of money in the name of profit shares, profit bonus, etc.
According to the law, as the chairman or director of the board, they cannot be the licensee or representatives of the licensee. Yet here the licensees are on the board of directors, some as chairmen and some as directors. The licensees are the top persons running the administration. So there is conflict of interests in the energy and mineral resource division and the licensees are ineffective as upstream regulators. Their role in upholding the consumers' interests and rights is contradictory.
Those who work as government officials in these companies, cannot be the owners of the companies. After independence, various corporations were established to run various sectors. Those who were, and are, in charge of these corporations, had no technical knowledge. Simply by dint of being an additional secretary, they were made chairmen of the corporations. When the corporations weren't running properly, these were made into companies in the name of restructuring. Those who were running the corporation, became the bosses of the companies. They were made the owners of the companies. This did not benefit the people in any way. Neither did the quality of service increase nor did the suffering lessen. The consumers suffered in both ways. These are state companies. The government can't make public servants the owners of the state.
Questions have arisen concerning import costs in the energy sector. How can expenditure be lessened?
If the total amount of furnace oil is imported through BPC rather than the private sector, around Tk 80 billion will be saved. If duty and tax exemption on the import of furnace oil is not withdrawn, around Tk 90 billion can be saved. According to BERC, there is a 4.18 per cent profit or margin in power generation. There is no saying how many more millions would be saved if that was followed. Whenever import costs of fuel oil are increased, tax, duty, VAT and BPC profits are increased too. But BPV and the energy division have no consideration of controlling that to ensure a justified and fair price at the consumer level. In other words, basic issues such as upholding public interests and rights are ignored in determining the costs. This goes against the government's public welfare principles.
You mentioned audit by the CAG office. Is there any precedence in this regard?
Yes, there is. When objections were raised concerning the income and expenditure of Dhaka and Chattogram WASA, these were audited by the CAG office in from 2004 to 2012 at the directives of the court.
What is your specific objection about furnace oil and LNG gas import?
The thing is, why was 150 or 200 per cent furnace oil used last year to generate 7 per cent electricity? BPC has continually increased the price of furnace oil to this level. And then most unfortunately, of the 5 million tonnes of furnace oil being imported, 4.5 million tonnes comes through the private sector. The price paid for this is Tk 92 per litre. So can you see where the problem lies? Even with rental power, the people are well aware that the pockets of certain chosen people are being filled in this special manner. By appointing contractors to import furnace oil and paying Tk 92 per litre for this, you are paying an additional Tk 80 million. And we have no idea how much more BPC is taking. It would have been possible to know this if they came to a public hearing. Instead of building up our own resources, LNG was imported. Where we could have got 1 cubic metre of gas for Tk 1.03, we spend Tk 83 to buy it from the spot market. They didn't have a twinge of conscience even. The gas which can be bought from a local company from BAPEX gas fields at Tk 1.03, is being imported as LNG and Tk 2.15 is being paid as LNG terminal service charge. Yet this gas could be availed in this country at half the price. The government wouldn't even have to spend this money.
Why didn't the government do this?
It was said that there was no money for the local companies to produce gas, and so extra payment was made along with the cost of gas, paying the government Tk 15 billion a year, and that is still now being paid every month. Only 35 per cent of that is being spent. The rest hasn't been spent or is with the energy division or Petrobangla. They haven't even been able to give an account of how far the local company has been able to increase gas production with this money. The government was given Tk 30 billion from that money. BERC has now written to the government asking for the unspent money. A strategic plan is supposed to be prepared and then approved by BERC, for the expenditure of that money. They have done nothing. It is the energy division and Petrobangla that has created this situation.
In 2016, an energy master plan was drawn up in which an import-dependent policy was adopted.
There are no legal bindings to a master plan and it can be drawn up at will. If there is no commitment to the people in the plan, there is no reason for us to bother about it. The 2016 master plan is being expanded in 2022. All this is a continuity of the master plan earlier drawn up on 2010. The competition, list, cost, and fuel supply to be ensured in the plans, were never carried out. The harmful elements were carried out. The damages which could have been controlled at present, have not been resolved. If the matter of list, cost, fuel supply could have been ensured, then furnace oil would not have had to be imported in this manner. This Tk 100 billion to Tk 120 billion would not have been wasted, but now it is being pocketed by a few people.
There is a lot of talk about gas not being extracted. But what would you say about the government power plants lying idle?
The matter of not extracting gas is clear to the people. But there are certain things outside of this that are not so clear to the general people. The capacity of single-cycle power plants is less, these use more gas and give less power. Combined cycle power plants cost less and produce more power. In single cycle power plans, Tk 1.50 is spent on gas per unit of electricity. The cost in combined cycle is Tk 1.10. If the gas being used for single cycle was used in the combined cycle, there would be one and a half times higher electricity production. Only 36 per cent of the capacity of PDB's combined cycle power plants, with low expenditure, is being used. It costs the least to run the Bhola power plant but only 38 per cent of that is utilised. If that could be increased to 74 to 75 per cent, then gas-fired power generation would decrease to below Tk 2. Bhola's combined cycle power plant has been kept closed supposedly for the lack of gas. When visiting Bhola before the corona outbreak, I got to know the real reason. A phone call comes at 12 in the night and instructions are given, close this unit, electricity will have to be taken from rental now. That is how it is. Our own power plants are being kept idle and electricity is being bought from the private sector at higher prices. There are so many equations being made in this manner. The government has entered a business model that spells doom to the people.
According to you, the three basic reasons behind the prevailing energy crisis are, the government doing business, adopting a corporate culture where the officials get special facilities, and filling the pockets of a select few. But the government blames the Ukraine war.
The Ukraine war is certainly not the major cause behind this predicament. It does have a certain impact, but we can tackle the situation with our own fuel. We could have evaded the impact of the Ukraine war if we did not create those factors which I mentioned responsible for the disorder in the energy sector.
Thank you too