Sep 14, 2024
| Emran Hossain
Bangladesh spent 20 per cent extra in the overall import of furnace oil for power generation during the tenure of the immediate past Awami League government thanks to the loopholes tucked away in the policy to benefit private companies.
An internal analysis of the Bangladesh Power Development Board revealed how the past government’s failure to implement an international scale to determine the cost of energy transportation helped private companies generate predatory profits from oil import.
The private companies often used half the capacity of the cargo vessel rented to transport the power-plant fuels to inflate their profits for they were entitled to a 9 per cent service charge on their expenses. The furnace oil needed for generating power is imported privately, by the owners of the oil-based power plants, which accounts for 5,885MW out of the country’s total installed generation capacity of 27,791MW.
In 2022–23, Bangladesh spent over Tk 38,000 crore for importing furnace oil amidst a staggering economic crisis that forced the country to turn to the International Monetary Fund for a $4.7 billion loan. ‘The energy import cost could have been reduced by at least 20 per cent by streamlining the energy import policy,’ said a power development board high official preferring anonymity, who was involved in the analysis.
A document used in the analysis showed that the Baraka Shikalbaha Power Limited, owner of three fuel-oil-based power plants worth 265MW, in one shipment imported over 15,000 tonnes of furnace oil submitting that in freight charge it spent over $43 per tonne of the oil. The power company used a mid-range tanker with a capacity to carry 30,000 tonnes for the import from Singapore to Bangladesh.
Given that furnace oil-based power plants are frequently used for power generation, which accounted for a fourth of the total power generated in 2022–23, Baraka could have coordinated oil imports among its three power plants ensuring that full freight capacity was used to lower expenses, said PDB officials. The analysis further revealed that coal-fired power plants, which followed a global freight standard, imported per tonne of coal for a freight charge of $13–$14 from Indonesia in mid-range tankers.
The power development board’s finance division officials said that some operators of oil-based power plants even charged $60 in the import of a tonne of oil. Energy experts argued that the transport cost of oil should be lower than that of coal, which is far difficult to handle than oil, which is loaded onto and unloaded from the ship using a pipeline. ‘People know very little about energy import, its ins and outs. We demand a thorough evaluation of the past energy imports,’ said energy expert Ijaz Hossain.
The PDB analysis also revealed that the private companies involved offshore companies in some of the import deals which increased the import expense by 7 per cent. Involving third parties in the import was allowed in the contracts the private power producers signed with the government. The power producer directly importing furnace oil was subjected to 25 per cent customs duty and value added tax. Involving a third party meant a 7 per cent increase in the cost for it required the additional payment of 5 per cent advance tax and 2 per cent advance income tax.
‘The third parties were always offshore companies of the private power producers,’ said the PDB official. Furnace-oil-based power plants have been one of the many loopholes in the power system draining the country’s dollar reserve over the last one and a half decades. Rental power plants were mostly oil-based. All power plants were established by the Awami League government under an indemnity law denying people the right to take anyone to court for harmful power deals.
Rental power plants were initially introduced as an immediate measure to tackle a crippling power crisis with expensive arrangement such as capacity charge, which is the amount of money payable by the government based on a power plant’s capacity rather than power actually produced. The owners of furnace-oil-based power plants include controversial power companies accused of pocketing huge amount of money through unequal power deals.
The companies included Summit Group, United Group, Orion Group, Sikder Group, Doreen Group, and Confidence Group. ‘Each of the private power producers charge way more in energy import than it should be over the last decade,’ said Hasan Mehedi, member secretary, Bangladesh Working Group on Ecology and Development. ‘PDB raised alarm against these oligarchs whom the past government nurtured,’ he said.
Last year the power development board’s loss mounted to Tk 43,539 crore. In 2022–23, the government paid a subsidy of Tk 39,535 crore, part of which went into paying the service charge to the private power producers. Board officials responsible for looking after company affairs and private power plants’ operations did not answer phone calls for comments.
News Link: https://www.newagebd.net/post/country/245291/power-producers-make-wicked-profits